Fragile states' economies. What does fragility mean for economic performance?
This paper looks at fragile states and their characteristics in terms of foreign direct investment, local investment and sectoral composition
Abstract
This paper looks at fragile states and their characteristics in terms of FDI (and sources of), local investment, and sectoral composition for both where possible. It focuses in particular on post-conflict states, and possible booms in investment associated therewith. It covers:
- Relationships found between fragility and conflict-affliction and economic performance. This section summarises the definitions, findings from the literature review, and some presentation of data on key relationships.
- Data analysis on FDI in fragile states. This section presents the analysis undertaken including some regressions undertaken on fragility and FDI.
- The literature review presents in tabular form a summary of interesting papers on the core questions of interest. The table presents the most relevant findings from these papers.
It is concluded that countries with valuable and/or substantial resources tend to attract greater amounts of investment. However receiving investment purely for extraction may have other consequences as the literature suggests a link to further conflict. For countries that rely so heavily on natural resources, diversifying or developing additional industries (such as processing for the natural resources) will enable foreign investment to have a greater effect on development.
Citation
Holden, J.; Pagel, M. Fragile states’ economies. What does fragility mean for economic performance? EPS-PEAKS, UK (2012) 44 pp.