Does foreign direct investment reduce poverty? The case of Latin America in the twenty-first century

• Published in: Business and economic horizons Vol. 14; no. 3; pp. 488 - 500
• Main Authors: Quiñonez, Pablo, Sáenz, Joselin, Solorzano, Jessica
• Format: Journal Article
• Language: English
• Published: Prague Prague Development Center 01.01.2018
• Subjects: Economic models; Economy; Foreign investment; Poverty; Latin America; Development; FDI; poverty; globalisation; Latin America
• ISSN: 1804-5006; 1804-1205; 1804-5006
• DOI: 10.15208/beh.2018.35

Over the last decades, foreign direct investment flows to Latin America have grown dramatically. Yet, there is no consensus on whether the region has actually benefited from such trend or not. Specifically, regarding the expected positive effect of foreign direct investment on poverty reduction, empirical evidence is scant and ambiguous. In this context, this paper examines the effect of foreign direct investment on Latin America’s poverty incidence. For doing so, a panel data analysis was conducted, considering 13 economies from the region during the 2000-2014 period. We found that FDI is not significantly associated with the reduction of poverty in Latin America, in contrast with macroeconomic stability, infrastructure, human capital development and financial development which are significantly associated with the reduction of poverty in the region.