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FDI, Poverty, and the Politics of Potable Water Access

Nita Rudra, Meir Alkon and Siddharth Joshi

Economics and Politics, 2018, vol. 30, issue 3, 366-393

Abstract: How does foreign direct investment (FDI) affect the wellbeing of the poor? We address this question by analyzing the impacts of FDI on access to potable water. We predict that higher levels of greenfield FDI in water‐intensive sectors slow the rate of access to potable water in developing countries, with these adverse effects conditional on subnational politics. We hypothesize that this is more likely to occur in polities marked by relatively large poor and marginalized populations, where regulatory capture is more likely to occur. To test our intuition, we analyze subnational data on greenfield FDI in India, confirming that multinational investment in “thirsty” manufacturing sectors are negatively associated with improvements in potable water access. We then present a controlled comparison case study of two Indian states, Kerala and Rajasthan, highlighting the political mechanisms conditioning FDI's effects on potable water.

Date: 2018
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Handle: RePEc:bla:ecopol:v:30:y:2018:i:3:p:366-393