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Foreign Direct Investment and Income Inequality in Latin America

Author

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  • Willem te Velde , Dirk

    (Overseas Development Institute)

Abstract

There is a heated debate on the effects of Foreign Direct Investment on development. Proponents argue that FDI is good for development, and hence the rapid expansion of FDI in Latin America in the past decade and a half is manna from heaven. In some cases, it is indeed difficult to imagine whether the same development level could have been achieved without FDI. Critics, however, contend that FDI leads to more poverty, isolation and a neglect of local capabilities. Recent difficulties with privatisation in Latin America, which involved FDI, appear to tell us that not all share in the benefits. The paper positions Foreign Direct Investment (FDI) in the debate on income inequality in Latin America. The main conclusion of the paper is that while FDI may have been good for development, more can be done to improve its impact on income distribution and the poor in Latin America, either through appropriate government policies in the area of education, training and infrastructure (i.e. a general development policy), or through working directly with TNCs through incentives or partnerships. Determining which policies are most appropriate and relevant will depend on country characteristics as well as FDI characteristics, and hence will require further discussion and in-depth studies.

Suggested Citation

  • Willem te Velde , Dirk, 2003. "Foreign Direct Investment and Income Inequality in Latin America," Documentos de trabajo 4/2003, Instituto de Investigaciones Socio-Económicas (IISEC), Universidad Católica Boliviana.
  • Handle: RePEc:ris:iisecd:2003_004
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    References listed on IDEAS

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    Cited by:

    1. repec:ilo:ilowps:366690 is not listed on IDEAS
    2. Munshi, Farzana, 2008. "Globalization and Inter-occupational Inequality in a Panel of Countries: 1983-2003," Working Papers in Economics 302, University of Gothenburg, Department of Economics.
    3. Doytch, Nadia & Thelen, Nina & Mendoza, Ronald U., 2014. "The impact of FDI on child labor: Insights from an empirical analysis of sectoral FDI data and case studies," Children and Youth Services Review, Elsevier, vol. 47(P2), pages 157-167.
    4. Lykke E. Andersen & José Luis Evia, 2003. "The Effectiveness of Foreign Aid in Bolivia," Development Research Working Paper Series 01/2003, Institute for Advanced Development Studies.
    5. Ucal, Meltem & Bilgin, Mehmet Huseyin, 2009. "Income Inequality and FDI in Turkey: FM-OLS (Phillips-Hansen) Estimation and ARDL Approach to Cointegration," MPRA Paper 48765, University Library of Munich, Germany.
    6. Wang, Jiao & Mayes, David & Wan, Guanghua, 2005. "Income Distribution and Labour Movement in China after WTO Membership: A CGE Analysis," WIDER Working Paper Series 038, World Institute for Development Economic Research (UNU-WIDER).
    7. Nunnenkamp, Peter, 2004. "Wachstumseffekte von Direktinvestitionen in Entwicklungsländern: warum hohe Erwartungen häufig enttäuscht werden," Open Access Publications from Kiel Institute for the World Economy 3217, Kiel Institute for the World Economy (IfW).
    8. Anderson, Edward, 2005. "Openness and inequality in developing countries: A review of theory and recent evidence," World Development, Elsevier, vol. 33(7), pages 1045-1063, July.
    9. Bertrand Maximin, 2003. "Investissement direct étranger, dynamique industrielle et inégalité salariale en Asie," Mondes en développement, De Boeck Université, vol. 122(2), pages 85-105.
    10. repec:taf:eurpls:v:25:y:2017:i:3:p:462-480 is not listed on IDEAS
    11. 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.
    12. Fortanier, Fabienne & van Wijk, Jeroen, 2010. "Sustainable tourism industry development in sub-Saharan Africa: Consequences of foreign hotels for local employment," International Business Review, Elsevier, vol. 19(2), pages 191-205, April.
    13. repec:ilo:ilowps:384376 is not listed on IDEAS
    14. repec:zbw:ifwkie:4251 is not listed on IDEAS
    15. Lykke E. Andersen & Osvaldo Nina & Dirk Willem te Velde, 2004. "Trade, FDI, Growth and Poverty in Bolivia," Development Research Working Paper Series 03/2004, Institute for Advanced Development Studies.

    More about this item

    Keywords

    Foreign Direct Investment and Income Inequality; Latin America;

    JEL classification:

    • Z00 - Other Special Topics - - General - - - General

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