Is Greenfield investment improving welfare: A quantitative analysis for Latin American and Caribbean developing countries

Abstract

Greenfield investment is considered the backbone of emerging economies and developing countries. This research is carried out to investigate the causal impact of Greenfield investment as a target variable and some other controlled variables for the sample of 23 Latin American and Caribbean (LA&C) developing countries. The period is 1998–2017, and Levin, Lin and Chu (LLC) and System-Generalized Method of Moment (Sys-GMM) techniques are employed for analytical analysis. The Sys-GMM technique estimates show that Greenfield investment has a significant positive impact on these countries’ economic growth, health, education, and welfare. Furthermore, controlled variables remittances have a significant and positive impact, while foreign aid has a negative effect on the dependent variables. The rest of the other controlled variables show mixed results. From the analysis, it is suggested that Greenfield investment has improved per capita income, education and health sector that further enhanced the welfare of the society. In addition, new foreign investment creates job employment and brings innovations that improve labour skills. On the other hand, foreign aid must be avoided, which harms the economic activities of developing countries. Therefore, it is concluded that governments of Latin American and Caribbean developing countries adopt more friendly policies to attract Greenfield investment.