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Heterogeneous Sectoral Growth Effects of FDI in Egypt

Research output: Working paper

Published
Publication date05/2018
Place of PublicationLancaster
PublisherLancaster University, Department of Economics
Original languageEnglish

Publication series

NameEconomics Working Papers Series

Abstract

This paper is one of the first to investigate the sectoral dimension/perspective of FDI spillovers. It examines empirically the heterogeneous technology effects and efficiency gains of FDI across economic sectors in Egypt between 1990 and 2007. The results reveal many aspects of the aggregation bias of cross-country studies. In aggregate, inflows of FDI have no significant impact upon growth in Egypt; instead, growth is driven by government investment. The disaggregated analysis however, reveals that FDI has distinct sector-specific effects on the Egyptian economy that derive exclusively from investment in the Telecommunication & Information Technology. FDI in Services however, generates negative growth effects. The sectoral growth effects of FDI also depend upon the region of origin. Although the growth impact of FDI in Telecommunications from both the Middle East & North Africa (MENA) and Western economies is positive, the finding is primarily driven by investment from the latter nations. Further, there is some evidence to support the view that FDI into the Manufacturing & Petroleum sector from the MENA region has adverse growth effects. There is also limited evidence to suggest that ‘market-seeking’ Western (European and US) capital flows into the Services sector have conspicuous ‘crowding-out’ effects.