Analysis of FDI: impacts on total factor productivity in Madagascar

Résumé

This article is aiming at bringing its contribution to current debates on Madagascar's strategy for enhancing its industrial productivity. Indeed, generally speaking, productivity, meaning getting more production while using a minimum input quantity in terms of raw materials, energy and time, is one of the best ways in making industry reconcile with environmental integrity. Its main objective is to closely look at the impacts of FDI on the national economy’s total factor productivity (TFP) during the time spanning from 1988 to 2020. The chosen methodology consists in estimating, first, the TFP using a relationship stemming from the Cobb-Douglas model, and, then, the long-term equilibrium relation with the VECM method. The result shows that from 1988 to 2020, inward FDI in Madagascar acts negatively on total factor productivity, with a negative coefficient minus 0.4804. On the other hand, any increase in TFP is accompanied by an improvement in human capital in Madagascar, justified by the positive coefficient 2.4067. The high capital intensity in the   extractive industries related FDI contributes only very weakly to productivity growth.