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URL: http://geb.uni-giessen.de/geb/volltexte/2005/2290/


Foreign direct investment - income growth for all?

Krüger, Ralf ; Seith, Jennifer


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Universität Justus-Liebig-Universität Gießen
Institut: Professur für Volkswirtschaftslehre und Entwicklungsländerforschung
Fachgebiet: Wirtschaftswissenschaften
DDC-Sachgruppe: Wirtschaft (VWL)
Dokumentart: ResearchPaper (Forschungsbericht, Arbeitspapier)
Zeitschrift, Serie: Entwicklungsökonomische Diskussionsbeiträge (Erscheinen eingestellt) ; 33 / 2005
Sprache: Englisch
Erstellungsjahr: 2005
Publikationsdatum: 27.07.2005
Kurzfassung auf Englisch: The United Nations declared halving the number of poor people by 2015 as the first of their
eight Millennium Development Goals. Foreign direct investment (FDI) is often seen as one
instrument towards this goal because of its ability to stimulate economic growth trickling
down to the poor. Whereas many studies deal with those growth effects, little attention is paid
to possible direct poverty reducing effects. Therefore, we first examine different theoretical
direct and indirect ways through which FDI can affect the income of the poor. Wage effects
and possible job-creating effects are considered. We find that they depend on the existing human
capital and its distribution in society. Following Dollar and Kraay [2000] and Jalilian and
Weiss [2001] this hypothesis is confirmed empirically with the use of cross-country regressions
for a set of developing countries. In summary, this paper indicates that in developing
countries with existing and equally distributed human capital FDI can help fighting poverty
whereas in countries with little or very unequally distributed human capital FDI can raise poverty.