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Foreign direct investment, growth and income inequality in less developed countries

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  • Kevin Sylwester

Abstract

How does foreign direct investment (FDI) affect economic growth in less developed countries (LDCs)? What is its association with changes in the income distribution? This paper empirically examines these issues within a cross section of less developed countries between 1970 and 1989. FDI is positively associated with economic growth within this sample of countries. However, there is no strong association between FDI and changes in income inequality within these same countries and over this same time period. Hence, there is no evidence that FDI is increasing income inequality within this group of LDCs.

Suggested Citation

  • Kevin Sylwester, 2005. "Foreign direct investment, growth and income inequality in less developed countries," International Review of Applied Economics, Taylor & Francis Journals, vol. 19(3), pages 289-300.
  • Handle: RePEc:taf:irapec:v:19:y:2005:i:3:p:289-300
    DOI: 10.1080/02692170500119748
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    References listed on IDEAS

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    1. Xiaohui Liu & Peter Burridge & P. J. N. Sinclair, 2002. "Relationships between economic growth, foreign direct investment and trade: evidence from China," Applied Economics, Taylor & Francis Journals, vol. 34(11), pages 1433-1440.
    2. V. N. Balasubramanyam & M. Salisu & David Sapsford, 1999. "Foreign direct investment as an engine of growth," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 8(1), pages 27-40.
    3. Clarke, George R. G., 1995. "More evidence on income distribution and growth," Journal of Development Economics, Elsevier, vol. 47(2), pages 403-427, August.
    4. Karin Olofsdotter, 1998. "Foreign direct investment, country capabilities and economic growth," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 134(3), pages 534-547, September.
    5. Roland Bénabou, 1996. "Inequality and Growth," NBER Chapters,in: NBER Macroeconomics Annual 1996, Volume 11, pages 11-92 National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
    2. RIDZUAN, Abdul Rahim & NOOR, Abdul Halim Mohd & AHMED, Elsadig Musa, 2014. "To What Extent Are The Social Inequality Impacts Of Fdi In The Selected Asean?," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 14(1), pages 189-202.
    3. Anita Ghatak & Ferda Halicioglu, 2007. "Foreign direct investment and economic growth: some evidence from across the world," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 9(4), pages 381-394.
    4. Clark Don P. & Highfill Jannett & de Oliveira Campino Jonas & Rehman Scheherazade S., 2011. "FDI, Technology Spillovers, Growth, and Income Inequality: A Selective Survey," Global Economy Journal, De Gruyter, vol. 11(2), pages 1-44, July.
    5. Peter Nunnenkamp & Rainer Schweickert & Manfred Wiebelt, 2007. "Distributional Effects of FDI: How the Interaction of FDI and Economic Policy Affects Poor Households in Bolivia," Development Policy Review, Overseas Development Institute, vol. 25(4), pages 429-450, July.
    6. repec:bla:afrdev:v:29:y:2017:i:1:p:92-102 is not listed on IDEAS
    7. Mavikela, Nomahlubi & Khobai, Hlalefang, 2018. "Investigating the Link Between Foreign direct investment, Energy consumption and Economic growth in Argentina," MPRA Paper 83960, University Library of Munich, Germany.
    8. Jeffrey A. Edwards & Alfredo A. Romero & Zagros Madjd-Sadjadi, 2016. "Foreign direct investment, economic growth, and volatility: a useful model for policymakers," Empirical Economics, Springer, vol. 51(2), pages 681-705, September.
    9. Adams, Samuel, 2008. "Globalization and income inequality: Implications for intellectual property rights," Journal of Policy Modeling, Elsevier, vol. 30(5), pages 725-735.
    10. Blanco, Luisa R., 2012. "The Spatial Interdependence of FDI in Latin America," World Development, Elsevier, vol. 40(7), pages 1337-1351.
    11. repec:hur:ijarbs:v:7:y:2017:i:6:p:73-88 is not listed on IDEAS
    12. Francis Menjo Baye & Boniface Ngah Epo, 2015. "Impact of Human Capital Endowments on Inequality of Outcomes in Cameroon," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 61(1), pages 93-118, March.
    13. Adams, Samuel, 2009. "Foreign Direct investment, domestic investment, and economic growth in Sub-Saharan Africa," Journal of Policy Modeling, Elsevier, vol. 31(6), pages 939-949, November.
    14. Khatun, Fahmida & Ahamad, Mazbahul, 2015. "Foreign direct investment in the energy and power sector in Bangladesh: Implications for economic growth," Renewable and Sustainable Energy Reviews, Elsevier, vol. 52(C), pages 1369-1377.
    15. Muhammad Irfan Chani & Muhammad Azam & Akmal Younas, 2014. "The Causal Relationship between Foreign Direct Investment, Imports and Exports in Pakistan," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 3(3), pages 142-149, September.
    16. Saini, Swati & Mehra, Meeta K, 2014. "Impact of strengthening Intellectual Property Rights Regime on income inequality: An econometric analysis," MPRA Paper 56710, University Library of Munich, Germany, revised 12 Jun 2014.
    17. repec:eco:journ1:2017-03-68 is not listed on IDEAS
    18. Wu, Jyun-Yi & Hsu, Chih-Chiang, 2012. "Foreign direct investment and income inequality: Does the relationship vary with absorptive capacity?," Economic Modelling, Elsevier, vol. 29(6), pages 2183-2189.
    19. Baye Francis Menjo, 2015. "Impact of Education on Inequality Across the Wage Distribution Profile in Cameroon: 2005-10," WIDER Working Paper Series 014, World Institute for Development Economic Research (UNU-WIDER).

    More about this item

    Keywords

    Economic growth; income inequality; foreign direct investment; JEL Classification: O15; F21; F43;

    JEL classification:

    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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