TITLE:
A Dynamic Investigation of Foreign Direct Investment and Poverty Reduction in Mauritius
AUTHORS:
Sheereen Fauzel, Boopen Seetanah, Raja Vinesh Sannassee
KEYWORDS:
FDI, Poverty Reduction, HDI, VECM
JOURNAL NAME:
Theoretical Economics Letters,
Vol.6 No.2,
April
27,
2016
ABSTRACT: The focus of this study is to investigate the extent to which FDI flowing
in Mauritius reduces poverty or increases welfare by using time series data for
the period 1980-2013. This study methodologically departs from the existing
ones as it uses a dynamic vector autoregressive model that ensures the dynamic
behaviour of the time series under consideration is properly captured, while
simultaneously catering for endogeneity and causality issues. Any feedback and
indirect effects which might be present will also be detected within the
VAR/VECM framework. The results show that indeed FDI has contributed to poverty
reduction; albeit the magnitude of the coefficient is relatively smaller in the
short run as compared to the long run. Also a uni-directional causality is
observed between FDI and poverty reduction. Furthermore, the results confirm
the fact that FDI reduces poverty through the employment channel. Other
important factors contributing to a reduction in poverty according to this
study is an increase in government spending as well as trade openness. Whereas,
higher debt is observed to increase the level of poverty.