Resource discoveries and FDI bonanzas: An illustration from Mozambique

Mardi | 2018-02-13
Salle des thèses 16h – 17h20

Gerhard TOWENS – Pierre-Louis VéZINA

We show that giant and unpredictable oil and gas discoveries in developing countries trigger FDI bonanzas. Across countries, we document a 58% increase in FDI in the 2 years following a giant discovery. This effect is driven by new projects in non-resource sectors such as manufacturing, retail, business services and construction. We illustrate this mechanism using Mozambique’s recent post-discovery FDI boom. We combine concurrent waves of household surveys and firm censuses to estimate the local job multiplier of FDI projects. Our estimates suggest that each FDI job results in 6.2 additional jobs, of which 3.3 are informal. Our results thus link the offshore gas discovery in Mozambique to widespread job creation via a diversified FDI boom and a large local multiplier.