Inward and Outward Foreign Direct Investment and Inequality: Evidence from a Group of Middle-Income Countries

Chao-Hsi Huang, Kai-Fang Teng and Pan-Long Tsai
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Kai-Fang Teng: Department of Economics, National Tsing Hua University, Hsinchu, Taiwan2Taiwan Research Institute, Danshuei, Taipei, Taiwan
Pan-Long Tsai: Department of Economics, National Tsing Hua University, Hsinchu, Taiwan

Global Economy Journal (GEJ), 2016, vol. 16, issue 3, 511-538

Abstract: Using panel data of a group of 39 middle-income countries over 1981–2006, this paper examines how globalization in general and inward and outward FDI in particular affects inequality. Depending on geographical region and economic system, each component of globalization affects inequality in three groups of countries in different ways: open to inward FDI tends to affect income distribution adversely in transition economies and Latin American countries, but marginally improves income distribution in countries of the reference group. In contrast, open to outward FDI is positively associated with inequality in the reference group whereas negatively associated with that of the other two groups of countries. Crucially, improvement in human capital appears to be the single most reliable way to reduce inequality.

Keywords: globalization; foreign direct investment; income distribution; inequality (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1515/GEJ-2015-0068

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