Description
Title: Be Good to Your Neighbor: How Foreign Direct Investment Affects Poverty in Africa
Abstract: This study looks at how 44 African nations’ levels of poverty have changed over space as a result of FDI. The study employs the spatial Durbin model, the instrumental variable generalized method of moments estimator (IV-GMM), and the Driscoll-Kraay fixed effect instrumental variable regression to achieve this. Four key findings emerged from this study’s empirical investigation: (1) Improved institutional quality in neighboring countries has a significant impact on the FDI-poverty reduction nexus of the host country; (2) neighboring countries’ FDIs have a positive and significant impact on the incidence and intensity of the host country’s poverty; (3) the empirical results support a significant spatial spillover of poverty in the region; and (4) the marginal effect results show that countries within the region are no longer in isolation. This conclusion holds true even when using the inverse distance as an alternative proximity matrix. African governments should support institutional reform in the region through the African Union (AU), but we also urge them to establish a binding mechanism to ensure reform implementation because African nations are spatially interdependent.
Keywords: FDI; DriscollKraay fixed effect instrumental variable regression; IV-GMM; spatial Durbin model; poverty; institutional quality; Africa
Paper Quality: SCOPUS / Web of Science Level Research Paper
Subject: Economics
Writer Experience: 20+ Years
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