Sectoral FDI and food security in Developing Countries: Does institutional quality matter?

Tunisia - 2 August 2017

Trade topics: Trade and Development

Developing countries (DCs) have high population growth and food demand. Food security still one of the main goals in these countries. Moreover, foreign direct investment (FDI) is at the heart of their investment policy. For DCs attract FDI is an instrument to improve the economic growth and to generate positive spillovers on the economy. However, some negative effects could contradict this optimistic view. Taking into account the importance of local institutional quality, we investigate the effects of sectoral FDI on food security. Our results show that FDI inflows are determinant for economic growth and given certain institutional quality thresholds, primary and secondary FDI can improve food security. Our recommendation is that it is in DCs’ interest to improve their institutional quality and target the attraction of FDI.

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