UNU-WIDER Effect of the Liberalization of Investment Policies on Employment and Investment of Multinational Corporations in Africa

There has been a remarkable shift in the attitudes towards globalization. Specifically, the discussion among academics and policymakers has shifted from whether globalization should be encouraged to how countries can position themselves to benefit from globalization. This paper focuses on one aspect of globalization – the liberalization of investment policies – and analyzes its impact on employment and investments by multinational corporations in Africa. We use data for 33 countries over the period 1984–2003 and employ a dynamic panel estimator for our analysis. There are two major findings. First, liberalization has a significant and positive effect on investment. Second, liberalization does not have a direct impact on multinational employment – the effect is indirect liberalization stimulates multinational investments which in turn increases multinational employment. By increasing investment and employment from multinational firms, these liberalization programmes contribute to poverty alleviation.