How Foreign Direct Investments Affect Gender Inequality: Evidence From Lower-Middle-Income Countries

This study offers novel empirical evidence on the nonlinear dynamics between foreign direct investment and gender inequality in lower-middle-income countries. Employing a rigorous empirical strategy using the system generalized method of moments to address potential endogeneity concerns, we examine an unbalanced panel of 966 annual observations across 47 lower-middle-income countries from 1990 to 2021. The results demonstrate that FDI inflows significantly alleviate gender inequality, with a 1% increase in FDI corresponding to a 0.15% reduction in the gender inequality index. However, the analysis also uncovers a U-shaped relationship, with a turning point at approximately 10% of GDP, suggesting that while moderate FDI promotes gender equity, excessive FDI penetration may exacerbate disparities through labor market segmentation and unequal access to FDI-induced opportunities. These findings reinforce human capital theory and contribute to the broader discourse on the socio-economic implications that promote sustainable gender development in lower-middle-income countries.