Resource Discoveries, FDI Bonanzas, and Local Multipliers: Evidence from Mozambique

Abstract

We show that giant and unpredictable oil and gas discoveries trigger FDI bonanzas. Across developing countries, we document a 56% increase in FDI in the 2 years following a giant discovery. These booms are driven by new projects in sectors such as manufacturing, retail, services and construction. To assess the job creation effects of one such FDI bonanza in Mozambique we combine concurrent waves of household surveys and firm censuses and estimate the local job multiplier of FDI. Our estimates suggest that for each new FDI job, an additional 4.4 jobs are created locally, 2.1 of which are formal jobs.