The role of sectoral FDI in promoting agricultural production and improving food security

The aim of this paper is to examine the effects of foreign direct investments (FDI) on food security for 55 developing countries in a panel framework over the period 1995–2009. There are various measures of food security that can be used. Our first contribution is to build a composite indicator that synthesizes the food indicators used by the Food and Agriculture Organization to measure the food availability and food utilization. Second, our empirical study is based on a model composed of a food security equation and an agricultural production equation. Our results show that sectoral FDI have different effects on food security. FDI in the agriculture sector improves food security and FDI in the secondary and tertiary sector increases the food insecurity. We found a significant FDI׳s spillover through the agricultural production to food security. While the effect is positive with FDI in secondary sector, it is negative for FDI in the tertiary sector.