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Effect of Inward Foreign Direct Investment on Income Inequality in Transition Countries

  • Bhandari, Bornali

    ()

    (Fitchburg State College)

This paper empirically tests the link between FDI and income inequality for transitional countries in Eastern Europe and Central Asia for the period of 1990 to 2002. The theoretical motivation comes from a model developed in a previous paper, which predicts that inward FDI reduces income inequality for an economy where wage earners outnumber capital owners. Using fixed effects, there is no evidence that FDI inward stocks affect overall income inequality. However, breaking the effect into its components, the statistical evidence suggests that FDI inward stocks exacerbated wage income inequality, while reducing capital income inequality.

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Article provided by Center for Economic Integration, Sejong University in its journal Journal of Economic Integration.

Volume (Year): 22 (2007)
Issue (Month): ()
Pages: 888-928

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Handle: RePEc:ris:integr:0418
Contact details of provider: Web page: http://econo.sejong.ac.kr/
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  1. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
  2. Jagdish N. Bhagwati, 2004. "In Defense of Globalization: It Has a Human Face," Rivista di Politica Economica, SIPI Spa, vol. 94(6), pages 9-20, November-.
  3. Philippe Aghion & Simon Commander, 1999. "On the dynamics of inequality in the transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 275-298, July.
  4. Axel Dreher & Noel Gaston, 2008. "Has Globalization Increased Inequality?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 516-536, 08.
  5. Ferreira, Francisco H. G., 1997. "Economic transition and the distributions of income and wealth," Policy Research Working Paper Series 1808, The World Bank.
  6. Axel Dreher, 2002. "Does Globalization Affect Growth?," Development and Comp Systems 0210004, EconWPA, revised 04 Feb 2003.
  7. Borraz Fernando & Lopez-Cordova Jose Ernesto, 2007. "Has Globalization Deepened Income Inequality in Mexico?," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-57, February.
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