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Bridging the Regional Divide - The Impact of FDI on Economic Inequality

Author

Listed:
  • Silvia-Elena Iacob

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Liana Badea

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • George-Laurentiu Serban-Oprescu

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Andrei Hrebenciuc

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Mihaela-Roberta Stanef

    (Bucharest University of Economic Studies, Bucharest, Romania)

  • Sorin Nastasia

    (Southern Illinois University Edwardsville, Edwardsville, SUA)

Abstract

The connection between foreign direct investment (FDI) and regional disparities is a current issue today in the context of the dynamics of the global financial landscape. This relationship is a complex one and varies according to countries' economic, historical, social and cultural context, level of development, and specific influencing factors. FDI can promote economic growth, but the positive impact depends on a number of elements, such as human capital, financial development, economic freedom, etc. The existing literature emphasises that the effects of FDI over time have not been uniform. Thus, in countries or regions with high incomes and strong institutions, the benefits are clearer and more consistent. But in economies with structural problems, the effect may be weak or even negative. Based on such considerations, our study aims to explore the impact of foreign direct investment on regional economic disparities in Romania, in the context of complex global capital mobility and geopolitical challenges. To quantify the effect of FDI on regional inequality, an econometric linear regression model with the Gini coefficient as the dependent variable was used. The results show that, while foreign direct investment and GDP growth individually contribute to reducing inequality, their interaction can exacerbate disparities, particularly in the absence of absorptive capacity and equitable policy frameworks.

Suggested Citation

  • Silvia-Elena Iacob & Liana Badea & George-Laurentiu Serban-Oprescu & Andrei Hrebenciuc & Mihaela-Roberta Stanef & Sorin Nastasia, 2025. "Bridging the Regional Divide - The Impact of FDI on Economic Inequality," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 27(S19), pages 1350-1350, November.
    • Handle: RePEc:aes:amfeco:v:27:y:2025:i:s19:p:1350
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    References listed on IDEAS

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    JEL classification:

    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General

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