The benefits of foreign direct investment and its alternatives: An empirical exploration

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Abstract
Utilizing data on mining activities in Sierra Leone this paper examines the benefits derived by the host economy from the activities of foreign‐owned companies and, in the case of diamonds, compares these with the benefits derived from an alternative mode of production. The comparison is generally to the advantage of the technically primitive, high‐cost but more nearly indigenous Alluvial Diamond Scheme (ADS): partly due to the adoption of production techniques better suited to relative factor scarcities in Sierra Leone and partly due to the nationality of ownership, the ADS tends to impart greater benefits to the national economy from a given deposit of diamonds than the modern, capital‐intensive mining company.

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