Joint Discussion Paper Series in Economics 37-2015
This paper investigates the effect of sectoral foreign direct investment (FDI) on economic growth in Egypt, using a novel panel dataset of 26 Egyptian governorates for the period 1992-2007. The growth literature is robust with the benefits of using a within-country dataset for such a research question (Ford et al., 2008). Despite the large number of theoretical models on the channels through which FDI can enhance economic growth, empirical findings are still inconclusive. We argue that one possible reason for the ambiguous effect is the use of aggregate FDI data across different sectors. Our results show no significant effect of aggregate FDI stock on economic growth in Egyptian governorates, which can be partly explained by the contradictory growth effects of FDI at the sectoral level. We find a positive effect of manufacturing FDI, a negative effect of agricultural FDI and no significant effect of services FDI on economic growth.
foreign direct investment sectoral FDI economic growth Egypt