Abstract
In this study, we analyze the spatial effect of foreign direct investment (FDI) on poverty reduction in Vietnam. This study uses the provincial-level panel data and the fixed-effects regression and the spatial econometric model to investigate empirically the impact of FDI on poverty reduction in Vietnam. The study finds that FDI has contributed to poverty reduction not only directly but also indirectly through human capital. However, FDI has indirectly worsened poverty through international trade. In addition, empirical results from the spatial econometric model show that FDI tends to decrease poverty in provinces. Finally, the study has some policy implications to decrease the negative effects of FDI on poverty reduction in Vietnam.
Highlights
The ultimate goal of the economic development is to bring social progress to people, so the aim of poverty reduction is always put in the first priority in order to achieve the economic development
Since the main objective of this paper is to investigate the impact of foreign direct investment (FDI) poverty reduction in Vietnam, the dependent variable used in this study is the poverty rate
Estimating the fixed effects data (FE) regression model shows that FDI has a positive effect on poverty reduction in Vietnam
Summary
The ultimate goal of the economic development is to bring social progress to people, so the aim of poverty reduction is always put in the first priority in order to achieve the economic development. To achieve this goal, developing countries need to take advantage of domestic and foreign resources to boost economic growth, and increase people’s income, thereby reducing poverty. And empirically, most economists believe that FDI can affect poverty reduction positively through job creation, knowledge transfer, which makes contribution to economic growth Growth can even aggravate the poverty if it is accompanied by increasing social inequality
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