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Distributional Effects of Foreign versus Domestic Investment: Evidence from Post-Communist EU Member States

Author

Listed:
  • Kosta Josifidis
  • Novica Supić
  • Slađana Bodor

Abstract

The paper provides insight into the relationship between foreign and domestic investment, and its effect on income distribution in the post-communist EU member states. The analysis is conducted using the general method of moment (GMM) estimator on panel data of the 10 Central and Eastern European (CEE) new member states from 1993-2017. The results reveal that a greater level of foreign direct investments (FDI) contributed to eliminating the negative effects of domestic investment on income distribution, particularly mass layoffs and the transfer of wealth into the hands of a small economic and political elite. It leads to the conclusion that FDI has played a significant role in reducing income inequality and rebuilding the middle class in the post-communist EU member states.Key words: Foreign direct investment, Domestic investment, Income distribution, Post-communist EU member states.JEL: D30, D63, F21.

Suggested Citation

  • Kosta Josifidis & Novica Supić & Slađana Bodor, 2021. "Distributional Effects of Foreign versus Domestic Investment: Evidence from Post-Communist EU Member States," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 68(2), pages 187-211.
    • Handle: RePEc:voj:journl:v:68:y:2021:i:2:p:187-211:id:1453
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    More about this item

    Keywords

    Foreign direct investment; Domestic investment; Income distribution; Post-communist EU member states;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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