Exploring the impact of foreign direct investment on poverty reduction in Latin America: Evidence from panel quantile regression model

Alleviating poverty stands as one of the paramount global challenges, particularly in regions like Latin America, where socioeconomic disparities persist. Therefore, this study aims to investigate the relationship between Foreign Direct Investment (FDI) and poverty reduction in 14 Latin American countries from 1992 to 2022. Utilizing panel quantile regression analysis, we explored the nuanced relationships between key economic factors and poverty levels across different income quantiles in the region. Our findings consistently demonstrate that higher FDI levels are associated with lower poverty rates across all income groups, highlighting the potential of FDI as a driver of poverty reduction. We also uncover negative associations between poverty and factors such as trade openness and labor participation, while income inequality emerges as a significant contributor to poverty levels. In light of these findings, we propose several policy implications, including measures to attract FDI through tax incentives and infrastructure development; promote trade openness and labor participation; mitigate income inequality through progressive taxation and social safety nets; and prioritize targeted investment strategies in sectors benefitting lower-income groups, such as education and healthcare.