Reassessing the potential of FDI for poverty reduction in Africa: A replication and extension of

This study undertakes a replication and extension of the work by Gohou and Soumaré (GS hereafter; World Development, 2012). Using a sample of 52 African countries from 1990 to 2007, GS found a positive relationship between foreign direct investment (FDI) and poverty reduction, moderated by regional integration. This paper reassesses the robustness of GS's findings by (1) reproducing their study and (2) conducting a replication and extension with updated data (1990–2022), measures of poverty and FDI, and moderators including institutional quality and the sectoral composition of investment. Our analysis fails to corroborate the results. We uncover no consistent evidence to support the hypothesis that FDI reduces poverty, and the regional patterns differ from those originally reported. In our extended analysis, FDI inflows per capita are positively associated with the Human Development Index (HDI), FDI stock demonstrates no consistent effect on HDI or poverty indicators. Regional variation in FDI effects is evident, though results remain inconsistent across measures. Institutional quality yields mixed outcomes: it interacts insignificantly with FDI per capita yet strengthens the relationship between FDI-to-GDP and outcomes such as life expectancy and infant mortality. Evidence concerning the prevalence of malnourishment remains inconclusive. A sectoral disaggregation indicates that FDI directed toward the primary sector is associated with adverse outcomes, whereas the effects in the secondary and tertiary sectors are mixed, with the tertiary sector showing statistically significant results. These findings underscore sensitivity of results to measurement choices and highlight the need for efforts to ensure FDI contributes meaningfully to poverty reduction.