The Impact of FDI Inflows on Poverty Reduction: Empirical Evidence from Egypt

Abstract

Foreign direct investment (FDI) is a major driver of international economic integration. With the right policy framework, FDI can provide financial stability, promote economic development and enhance the well-being of societies. It is generally considered by many international institutions, politicians and economists, as a factor promoting the economic growth of the recipient/ host country, as well as solving the economic problems of developing countries. This can be achieved through allowing the host country to; improve its competitive position; transfer technology and knowledge between economies; promote its products on a larger scale in international markets. In addition to all these benefits, FDI is considered as an important source of capital for the host country. In the light of this, this paper aims to determine the impact of FDI on poverty in Egypt during the period of 1961 to 2018 using Autoregressive distributive lag model (ARDL) Since there is no single variable that can capture poverty in Egypt, three variables have been used as proxy to poverty which are Household Consumption (POV1), Infant Mortality rate (POV2), and Life Expectancy at birth (POV3). After combining the results, some policy recommendations are proposed to enhance the impact of FDI on poverty reduction in Egypt which in turn affects economic growth.