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Does Foreign Direct Investment (FDI) Promote Socioeconomic Development? Evidence from Advanced, Emerging-market, Developing and Transition Economies

Das Minakshee ()
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Das Minakshee: University of Ljubljana, Faculty of Economics, Ljubljana, Slovenia

Man and the Economy, 2020, vol. 7, issue 1, 25

Abstract: This paper examines the impact of inward foreign direct investment (FDI) on host countries’ socioeconomic development for a sample of more than 80 countries during 1986–2017. It analyses three main areas, namely—health, social-protection and income-distribution, represented by life-expectancy, unemployment-rate and GINI index respectively. The countries are grouped into four categories according to the United Nations Conference on Trade and Development (UNCTAD) classification, namely—advanced, emerging-market, developing and transition economies. Previous literature provides an equivocal picture of the impact of inward FDI on socioeconomic development. Several researchers have noted that a certain threshold level of development in the host country is necessary to make it possible to exploit the benefits of inward FDI. The analysis shows that the impact of inward FDI differs with the three main areas (namely—health, social-protection and income-distribution) with different country groups. In general, with an increase in inward FDI the life-expectancy increases, unemployment-rate deepens and the income-distribution becomes more skewed. The findings have important policy implications. The policies should be designed in such a way that there is a positive long-term impact on socioeconomic development by encouraging inward FDI.

Keywords: foreign direct investment; economic growth; socioeconomic; development; panel data; D31; E24; F21; I12; O15 (search for similar items in EconPapers)
Date: 2020
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