Abstract
While there have been general discussions on the possible direct and indirect effects of FDI on poverty, there are few formal quantitative tests of these propositions. This paper attempts to address this gap in the literature. We first consider a theoretical model and then examine data on a sample of countries to quantify the FDI-growth-poverty relation. At the very minimum our analysis has found no evidence that FDI either weakens growth or reduces the incomes of the poor. More positively, our econometric analysis finds that FDI inflows, particularly in the case of ASEAN, are associated with higher economic growth, and that there is a close relation between average income growth and growth of the income of the poor.
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