The process of income inequality development from foreign direct investment in developing countries: a system dynamics approach

Pard Teekasap

International Journal of Process Management and Benchmarking, 2014, vol. 4, issue 2, 127-144

Abstract: This paper studies the development process of an income inequality from the foreign direct investment (FDI) in developing countries using system dynamics modelling approach. This study models the country into two regions with separated economic situation but people can move across the region. FDI selects the investment location based on the operating cost. The results show that when one region can attract more FDI than another region, the wages of the workers in that region will increase and more people will relocate to that region, which creates income inequality. However, when the unemployment rate is low, the wages of both regions will increase and the income inequality drops. The policy supporting worker relocation can reduce the income inequality but the wages are also reduced.

Keywords: foreign direct investment; FDI; income inequality; Kuznets curve; system dynamics; developing countries; economic process; unemployment rate; policy analysis; worker relocation; modelling; investment location; wages. (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.inderscience.com/link.php?id=60404 (text/html)
Access to full text is restricted to subscribers.

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:ids:ijpmbe:v:4:y:2014:i:2:p:127-144

Access Statistics for this article

More articles in International Journal of Process Management and Benchmarking from Inderscience Enterprises Ltd
Bibliographic data for series maintained by Sarah Parker ().