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FDI and Income Inequality - Evidence from Latin American Economies

  • Dierk Herzer
  • Philipp Hühne
  • Peter Nunnenkamp

We analyze whether foreign direct investment (FDI) has contributed to the typically wide income gaps in five Latin American host countries. We perform country-specific and panel cointegration techniques to assess the long-run impact of inward FDI stocks on income inequality among households in Bolivia, Chile, Colombia, Mexico and Uruguay. The panel cointegration analysis reveals a significant and positive effect on income inequality. Furthermore, FDI contributed to widening income gaps in all individual sample countries, except for Uruguay. Our findings are robust to the choice of different estimation methods. There is no evidence for reverse causality

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File URL: https://www.ifw-members.ifw-kiel.de/publications/fdi-and-income-inequality-evidence-from-latin-american-economies/KWP_1791.pdf
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1791.

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Length: 38 pages
Date of creation: Aug 2012
Date of revision:
Handle: RePEc:kie:kieliw:1791
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