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The State of African Cities 2018 - Part B


FDI is an agent of global economic integration (Mah, 2003) and many developing economies have adopted FDI liberalisation policies to help facilitate its benefits. However, despite increasing investments in developing economies, poverty and income inequality persist and remain a major challenge. The relationship between FDI and income inequality is often divided into the Neoclassical and Dependency Theories. The former optimistically argues that FDI stimulates higher economic growth and, hence, lower inequality. The latter states that FDI has negative effects on economic growth and leads to higher income inequality (Firebaugh and Beck, 1994).

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