The Effect of Trade and Foreign Direct Investment on Inequality: Do Governance and Macroeconomic Stability Matter?
AbstractThrough dynamic panel data techniques and applying the estimated household income inequality data-set (Galbraith and Kum, 2003), this paper is aimed at exploring the effect of economic variables such as trade, foreign direct investment (FDI) and inflation on inequality, under different scenarios of domestic efficiency and over time. Trade benefits income distribution, whereas FDI and inflation increase inequality. The expansion of exports and employment based on the primary sector does not provide distributional effects, not even in low income countries. Those economies associated with macroeconomic stability and a high governance indicator can mitigate the adverse effect of FDI on income distribution, and enhance the benefits of trade. In the longer run, employment in industry, trade and in particular manufactured exports, can exert more distributional effects, while the adverse effect of FDI and inflation decreases.
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Bibliographic InfoArticle provided by in its journal Economia Mexicana NUEVA EPOCA.
Volume (Year): XX (2011)
Issue (Month): 1 (January-June)
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Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- F59 - International Economics - - International Relations and International Political Economy - - - Other
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
- P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems
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