The Impact of Foreign Direct Investment on Income Inequality in Vietnam

Quoc Hoi Le, Quynh Anh Do, Hong Chuong Pham and Thanh Duong Nguyen
Additional contact information
Quoc Hoi Le: Faculty of Economics, National Economics University, Hanoi 100000, Vietnam
Quynh Anh Do: Faculty of Economics, National Economics University, Hanoi 100000, Vietnam
Hong Chuong Pham: Faculty of Tourism and Hospitality, National Economics University, Hanoi 100000, Vietnam
Thanh Duong Nguyen: School of Banking and Finance, National Economics University, Hanoi 100000, Vietnam

Economies, 2021, vol. 9, issue 1, 1-15

Abstract: Foreign direct investments (FDI) is an important determinant of economic growth. FDI does not only contribute to the growth and economic development but also affects income through contributing to economic development and the impact on employment and salary structure of developing countries. The aim of this paper is to analyze the impact of FDI on income inequality in Vietnam. This study is the first attempt to examine the impact of FDI on income inequality under the constraints of the institution and education levels. To address the potential endogeneity problem, this study adopts Genernalized Method of Moment (GMM) model to conduct the estimation. A two-step GMM model with robust standard errors is used in the study. Empirical results show that FDI tends to increase income inequality in Vietnam and the existence of a non-linearity relationship between FDI and income inequality is also validated. Moreover, the study finds that the effects of FDI on income inequality are different depending on the level of education and institutions of the host provinces in Vietnam. The results of this study imply that, in order to ensure sustainable development, Vietnam’s policies should focus on improving the quality of economic governance and the administrative reform efforts of the government of the provinces and cities. Besides, policies should focus on increasing investment in public education and improving human capital, which not only can reduce income inequality but also can attract more FDI inflows.

Keywords: foreign direct investment; income inequality; Vietnam; GMM (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://www.mdpi.com/2227-7099/9/1/27/pdf (application/pdf)
https://www.mdpi.com/2227-7099/9/1/27/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jecomi:v:9:y:2021:i:1:p:27-:d:508356

Access Statistics for this article

Economies is currently edited by Ms. Hongyan Zhang

More articles in Economies from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().