Is foreign direct investment good for the poor? New evidence from African countries

This paper conducts an empirical investigation of the relationship between foreign direct investment (FDI) inflows and poverty in selected African economies. Using system generalised method of moments, our findings showed that FDI inflows have significantly contributed to poverty reduction in African countries. Our results also showed that better institutional quality and human capital development are associated with reducing poverty. Furthermore, interacting FDI with financial development was found to significantly reduce poverty, thus providing support to the hypothesis that better functioning financial systems enhance the efficiency of FDI in reducing poverty.