The Impact of Greenfield-FDI on Socio-Economic Development of Pakistan

Ali Raza, Muhammad Azam and Muhammad Tariq
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Ali Raza: Abdul Wali Khan University Mardan, Pakistan
Muhammad Tariq: Abdul Wali Khan University Mardan, Pakistan

HSE Economic Journal, 2020, vol. 24, issue 3, 415–433

Abstract: A multinational corporation usually invests in foreign countries in two modes of Foreign Direct Investment (FDI) encompasses, Greenfield-FDI (GFDI) and Merger & Acquisition (M&A). Mostly Asian countries have experienced improved economic growth from the incoming Green­ field-FDI. The existing studies reveal that GFDI plays undeniably a very important role in the process of economic growth and economic development of a host country's economic performance. Thus, the goal of this study is to know the effect of GFDI inflow on education, health, living standard, and economic development for Pakistan, while using data set from 1990–2018. This study used the Correlation matrix, Augmented Dickey-Fuller (ADF), and Philips Peron (PP) tests for unit root, Auto Distributive Lag model (ARDL), and Error Correction Model (ECM) as estimation techniques. The empirical results indicate that there exists a long-run relationship between GFDI, health, and economic development by Human Development Index (HDI) only. In the long-run GFDI, remittances, and foreign trade have positive, while foreign aid by Official Development Assistance (ODA) and inflation rate negatively affect the life expectancy index, which might mean negative health effects. These findings suggest some important policy measures can be adopted to take more benefits of FDI and stimulate economic growth and socio-economic development.

Keywords: greenfield-FDI; Human Development Index; education; health; living standard; Pakistan (search for similar items in EconPapers)
JEL-codes: F24 F35 I15 I25 (search for similar items in EconPapers)
Date: 2020
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