Foreign Direct Investment and the Poverty Reduction Nexus in Southeast Asia

Nathapornpan Piyaareekul Uttama

49 citations0/0 files storedEconomic studies in inequality, social exclusion and well-being

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International Business and FDI International Development and Aid Income, Poverty, and Inequality

Abstract

This study attempts to empirically investigate the determinants of foreign direct investment (FDI) and related factors on Association of the Southeast Asian Nations’s (ASEAN) poverty reduction, and focuses on spatial quantitative empirical evidence available on the ASEAN region. The spatial specification model is constructed and estimated by using the spatial panel data modelSpatial panel data model technique. It is empirically estimated on the basis of a crucial assumption that the individual-country factors such as globalization factors, financial factors, political factors, and infrastructure factors and spatial FDI affect poverty reduction in ASEAN. Data at the country level for ASEAN-6 during the period 1995–2011 are collected from World Data Bank and International Country Risk Guide (ICRG). The analyses confirm the positive significant relationship between FDI inflows and poverty reduction in ASEAN in both individual and spatial aspects. Nevertheless, this relationship is significantly different between other factors and poverty reductionPoverty reduction in ASEAN. For instance, while the relationship remains positive and significant for GDP growth, openness, and foreign debt in ASEAN, it is significant negative for financial and infrastructure factors, and ambiguous for political factor. Our results are also robust to alternative model specifications. The study concludes that FDI is conducive to poverty reduction. It supports the notion that regional value chain enhancement on FDI flows is beneficial for this region. Providing a poverty model of spatial FDI to researchers, the study presents results that are beneficial to business sectors and policy makers who are related to the investment in ASEAN.

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References

2001Econometric Analysis of Cross Section and Panel Data 2005Do international migration and remittances reduce poverty in developing countries?2010Multivariate Granger causality between CO2 emissions, energy consumption, FDI (foreign direct investment) and GDP (gross domestic product): Evidence from a panel of BRIC (Brazil, Russian Federation, India, and China) countries 2010Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India 2004Is Globalization Reducing Poverty and Inequality?2006Estimating models of complex FDI: Are there third-country effects?2009ASEAN Economic Community Blueprint 2011Does Foreign Direct Investment Reduce Poverty in Africa and are There Regional Differences?

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