Ben Hassine Skander* and Aouadi Sami
The objective of this article is to study the different aspects of the relationship between the flows foreign direct investment and the quality of governance in an attempt to achieve a better understanding of the contribution of FDI to reducing the poverty. In particular, the thesis will empirically examine how the interdependence and complementarity between FDI and governance allow FDI to contribute to the reduction of poverty. Thus, this work will take a progressive course starting from the determinants FDI in developing countries and going as far as their effects on poverty, through governance, economic growth, development aid, external debt and international fund transfers. We expect, through this econometric study that FDI, in the presence of a good quality of governance can contribute to the reduction of poverty. We will pay particular attention to the identification of mechanisms, to through which FDI and governance affect poverty reduction.
Empirically, we are dealing with a study that takes into consideration the classical approach of FDI contribution to poverty reduction. Then, we treat a study taking into account institutional aspects on the basis of a sample made up of 102 countries, we estimate a dynamic panel model and we use the GMM method according to the Arellano and Bond (1998) approach. In this context, the basic hypothesis consisted of the existence of an indirect effect of FDI on poverty reduction through the channel of governance. The study of this hypothesis was formulated in a dynamic model applied to the data available on the countries of Sub-Saharan Africa, Asian countries (ASEAN), Latin American countries (MCAC) and Eastern European countries (Transition economy) between 1996-201. The results validate the hypothesis that institutional quality promotes the effect of FDI on poverty reduction.
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