Main Article Content

Kunofiwa TSAURAI
Associate Professor, Department of Finance, Risk Management and Banking, University of South Africa. Address: P.O. Box 392, UNISA 0003, Pretoria, South Africa
South Africa
Vol 27 No 2 (2018), Articles, pages 139-154
DOI: https://doi.org/10.15304/rge.27.2.5664
Submitted: 06-12-2018 Accepted: 06-12-2018 Published: 06-12-2018
Copyright How to Cite

Abstract

The study explored whether the complementarity between foreign direct investment
(FDI) and natural resources availability led to poverty reduction in Southern and Western
African nations using panel data analysis (fixed effects, random effects, pooled ordinary
least squares (OLS) and dynamic generalised methods of moments (GMM) with data
spanning from 2002 to 2012. The objective emanates from the theoretical view that if the
countries that are receiving FDI have abundance of natural resources, a large number of
the unemployed people are likely to get jobs, earn income and get out of poverty zone.
Three measures of poverty were used in the current study, namely life expectancy at
birth, total (years), household consumption expenditure as a ratio of gross national
product and mortality rate and infant (per 1 000 live births). Generally, all the four panel
data analysis methods produced similar finding: the interaction between FDI and natural
resources reduced poverty levels in African countries studied. Southern and Western
African nations are therefore urged to implement FDI enhancement policies which attract
foreign investors into the natural resources extraction sector if they want to sustainably
reduce poverty. Future studies should investigate other macroeconomic factors that must
be available in the host country before FDI reduce poverty in all its forms.
Cited by

Article Details

References

Adu, G. (2018). Impacts of foreign direct investment (FDI) on rural poverty in developing countries: The case of mining FDI in Ghana. Major Papers. 19. https://scholar.uwindsor.ca/major-papers/19.

Agarwal, M. Atri, P. and Kundu, S. (2017). Foreign direct investment and poverty reduction: India in regional context. South Asia Economic Journal, 18 (2), pp. 135-157.

Amin, S., (1974). Accumulation on a world scale: A critique of the theory of underdevelopment. New York: Monthly Review Press.

Arabyat, Y.A. (2017). The impact of foreign direct investment on poverty reduction in the developing countries. International Finance and Banking, 4 (2), pp. 92-111.

Arellano, M. and Bond, S. (1991). Some tests of specification for panel data: Monte Carlo evidence and an application to employment equations. The Review of Economic Studies, 58(2), pp. 277-297.

Aslam, A.L.M. (2017). Does consumption expenditure induce the economic growth? An empirical evidence from Sri Lanka. World Scientific News, 81 (2), pp. 221-234.

Aubell, H.S.J. and Mensah, H.K. (2007). Natural resource exploitation, environment and poverty: Linkages and impact of rural households in Asutifi in Ghana. Unpublished Master’s Dissertation: Agder University College with collaboration with United Nations University.

Azher, B.A. (1995), Rural savings: Their magnitude, determinants and mobilization, ‘Pakistan Development Review’, 34(4), 779-786.

Calvo, M.B., and Sanchez-Robles, B., (2002). Foreign direct investment, Economic freedom and Economic growth: New evidence from Latin America. Universidad de Cartabria, Economics Working Paper No. 4/03.

Dunning, J.H. (1973). The determinants of international production, Oxford Economic Papers 25.

Durowah, O. (2017). The role of aid for trade and foreign direct investment in poverty reduction: A panel data analysis of 91 developing countries. Theses and Dissertations. 1187. http://openprairie.sdstate.edu/etd/1187

Fauzel, S. Seetanah, B. and Sannassee, R.V. (2016). A dynamic investigation of foreign direct investment and poverty reduction in Mauritius. Theoretical Economics Letters, 6 (2), pp. 289-303.

Gohou, G. and Soumare, I. (2012). Does foreign direct investment reduce poverty in Africa and are there regional differences? World Development, 40 (1), pp. 75-95.

Guisan, M.C. and Exposito, P. (2010). Health expenditure, education, government effectiveness and quality of life in Africa and Asia. Regional and Sectoral Economic Studies, 10 (1), pp. 115-126.

Guisan, M.C. and Exposito, P. (2012). Investment, poverty and development in AsiaPacific countries: Econometric models and evolution, 2000-2010. Applied Econometrics and International Development, 12 (1), pp. 155-168.

Guisan, M.C. (2014). World Development, 2000-2010: Production, Investment and Savings In 21 Areas Of America, Africa, Asia-Pacific, Europe and Eurasia, Regional and Sectoral Economic Studies, Vol. 14 (2), pp. 193-211.

Guisan, M.C. (2015). Selected readings on econometrics methodology, 2001-2010: Causality, measure of variables, dynamic models and economic approaches to growth and development. Applied Econometrics and International Development, 15 (2), pp. 213-220.

Hmani, S. (2017). Interaction between FDI, poverty and inequality: Analysis in simultaneous equations. International Journal of Advances in Management and Economics, 6 (4), pp. 35-48.

Im, K.S. Pesaran, M.H. and Shin, Y. (2003). Testing unit roots in heterogeneous panels. Journal of Econometrics, 115 (1), pp. 53-74.

Jalilian, H. and Weiss, J. (2002). Foreign direct investment and poverty in the ASEAN region. ASEAN Economic Bulletin, 19 (3), pp. 231-253.

Kallonga, E. Ndoinyo, Y. Nelson, F. and Rodgers, A. (2003). Linking natural resource management and poverty reduction. Tanzania Natural Resource Forum Occasional Paper Number 1.

Kumar, N., and Pradhan, J.P., (2002). FDI, externalities and economic growth in developing countries: Some empirical explorations and implications for WTO negotiations on investment. RIS Discussion Paper No. 27/2002. New Delhi, India.

Lazreg, M. and Zouari, E. (2018). The impact of FDI on poverty reduction in North Africa. Journal of Economics and Management Sciences, 1 (1), pp. 37-50.

Levin, A. Lin, C.F. and Chu, C.S.J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108 (1), pp. 1-24.

Lopez-Feldman, A. Mora, J. and Taylor, J.E. (2006). Does natural resource extraction mitigate poverty and inequality? Evidence from rural Mexico. American Agricultural Economics Association Meeting, California, 23 to 26 July.

Magombeyi, M.T. and Odhiambo, N.M. (2017a). Causal relationship between FDI and poverty reduction in South Africa. Cogent Economics and Finance, 5 (1), pp. 1-12.

Magombeyi, M.T. and Odhiambo, N.M. (2017b). Does foreign direct investment reduce poverty? Empirical evidence from Tanzania. SPODAI Journal of Economics and Business, 67 (2), pp. 101-116.

Magombeyi, M.T. and Odhiambo, N.M. (2018a). FDI inflows and poverty reduction in Botswana: An empirical investigation. Cogent Economics and Finance, 6 (1), pp. 1-15.

Magombeyi, M.T. and Odhiambo, N.M. (2018b). Dynamic impact of FDI inflows on poverty reduction: Empirical evidence from South Africa. Sustainable Cities and Society, 39 (May), pp. 519-526.

Mirza, H. and Giroud, A. (2003). Regionalization, foreign direct investment and poverty reduction: The case of ASEAN. Asian Development Bank and OECD Development Centre Paris. Bradford University School of Management, West Yorkshire, United Kingdom.

Moatari, B. and Gaskari, R. (2016). The relationship between foreign direct investment and poverty reduction in developing countries. International Journal of Humanities and Cultural Studies, April (Special), pp. 2645-2651.

Nath, H., (2005). Trade, Foreign direct investment and growth: Evidence from transition economies. SHSU Economics and International Business Working Paper No. SHSU-EcoWP05-04. Huntsville, TX: Sam Houston State University.

Ogunniyi, M.B. and Igberi, C.O. (2014). The impact of foreign direct investment on poverty reduction in Nigeria. Journal of Economics and Sustainable Development, 5 (14), pp. 73-89.

Okpe, I.J. and Abu, G.A. (2009). Foreign private investment and poverty reduction in Nigeria (1975-2003). Journal of Social Sciences, 19 (3), pp. 205-211.

Romer, P. (1986). Increasing returns and long run economic growth. Journal of Political Economy, 94 (5), pp. 1002-1037.

Shamim, A. Azeem, P. and Naqvi, S.M.M.A. (2014). Impact of foreign direct investment on poverty reduction in Pakistan. International Journal of Academic Research in Business and Social Sciences, 4 (10), pp. 465-490.

Swan, T. (1956). Economic growth and capital accumulation. The Economic Record, 32 (2), pp. 334-361.

Solow, R., (1956). A contribution to the theory of economic growth. Quarterly Journal of Economics, 70 (1), pp. 65-94.

Trinh, N.H. (2017). Poverty reduction in Vietnam: The role of foreign direct investment. International Journal of Management and Applied Science, 3 (2), pp. 84-89.

Tsaurai, K. (2018) ‘Is the complementarity between education and financial development a panacea for poverty reduction?’, The Journal of Developing Areas, Vol. 52(4), pp. 227248.

Ucal, M.S. (2014). Panel data analysis of foreign direct investment and poverty from the perspective of developing countries. Procedia – Social and Behavioral Sciences, 109 (January), pp. 1101-1105.

Ukamaka, A.T. David, E.T. and Moses, O.I. (2016). Foreign direct investment and poverty reduction in Nigeria. International Journal of Business and Management Invention, 5 (6), pp. 19-28.

UNCTAD (2012). World Investment Report. New York: United Nations.

Uttama, N.P. (2015). Foreign direct investment and the poverty reduction nexus in Southeast Asia. In: Heshmati A. Maasoumi E. Wan G. (eds) Poverty Reduction Policies and Practices in Developing Asia. Economic Studies in Inequality, Social Exclusion and Well-Being. Springer, Singapore.

Yohanna, P. (2013). Foreign private investment and poverty situation in Nigeria 19812010: An empirical evidence. IOSR Journal of Economics and Finance, 1 (2), pp. 55-62