Be Nice to Thy Neighbors: Spatial Impact of Foreign Direct Investment on Poverty in Africa

Sodiq Arogundade, Mduduzi Biyase and Santos Bila
Additional contact information
Santos Bila: College of Business and Economics, Auckland Park Kingsway Campus, University of Johannesburg, P.O. Box 524, Auckland Park, Johannesburg 9020, South Africa

Economies, 2022, vol. 10, issue 6, 1-20

Abstract: This study examines the spatial impact of FDI on the poverty of 44 African countries. In achieving this, the study uses the Driscoll–Kraay fixed effect instrumental variable regression, the instrumental variable generalized method of moments estimator (IV-GMM), and the spatial Durbin model. The empirical investigation of this study yielded four significant findings: (1) neighboring countries’ FDIs have a positive and significant impact on the incidence and intensity of the host country’s poverty, (2) improved institutional quality in neighboring countries has a significant impact on the FDI–poverty reduction nexus of the host country, (3) the empirical results lend support for a significant spatial spillover of poverty in the region, (4) the marginal effect results indicate that countries within the region are no longer in isolation or independent, i.e., the level of poverty in a particular country is influenced by its determinants in the neighboring country. This result is robust to the alternative proximity matrix, which is the inverse distance. Since there is spatial interdependence among African countries, we recommend that African governments, through the African Union (AU), should not only champion the institutional reform in the region, but also establish a binding mechanism to ensure reform implementation.

Keywords: FDI; Driscoll–Kraay fixed effect instrumental variable regression; IV-GMM; spatial Durbin model; poverty; institutional quality; Africa (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.mdpi.com/2227-7099/10/6/128/pdf (application/pdf)
https://www.mdpi.com/2227-7099/10/6/128/ (text/html)

Related works:
Working Paper: Be Nice to thy Neighbours: Spatial impact of Foreign Direct Investment on Poverty in Africa (2021)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:10:y:2022:i:6:p:128-:d:829799

Access Statistics for this article

Economies is currently edited by Ms. Adore Zhou

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager (indexing@mdpi.com).