Aggregate & Heterogeneous Sectoral Growth Effects of FDI in Egypt

Ingham, Hilary and Read, Robert and Elkomy, Shimaa (2020) Aggregate & Heterogeneous Sectoral Growth Effects of FDI in Egypt. Review of Development Economics. ISSN 1363-6669

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Abstract

This paper investigates the sectoral impacts of FDI on growth in Egypt between 1990 and 2007 based upon a unique data set. It highlights the aggregation bias inherent in many empirical studies that focus solely on the economy-wide effects of foreign investment. Aggregate inflows of FDI are shown to be detrimental to the country’s economic growth performance, possibly as a result of the ‘crowding-out’ of more productive domestic investment. Some positive sector-specific effects however, are found for investment in Manufacturing & Petroleum, which also has beneficial spillovers into other sectors. FDI in the Finance & Retail and Telecommunications & Information Technology sectors are found to generate significantly negative growth effects while those in Services and Tourism are negative but generally insignificant. These findings suggest that ‘market-seeking’ FDI in certain sectors has conspicuous ‘crowding-out’ effects, possibly owing to insufficient domestic absorptive capacity. The results of this study further demonstrate the importance of potential sectoral heterogeneity of own sector and inter-sectoral economic growth effects of FDI. It therefore highlights the critical need for policy makers to take a more disaggregated sectoral-level evaluation of the benefits of foreign investment, particularly in developing economies such as Egypt.

Item Type:
Journal Article
Journal or Publication Title:
Review of Development Economics
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/aacsb/disciplinebasedresearch
Subjects:
ID Code:
144905
Deposited By:
Deposited On:
22 Jun 2020 08:15
Refereed?:
Yes
Published?:
Published
Last Modified:
22 Sep 2020 05:03