INEQUALITY, FDI AND ECONOMIC DEVELOPMENT: EVIDENCE FROM DEVELOPING COUNTRIES

Muhammad Majeed

The Singapore Economic Review (SER), 2017, vol. 62, issue 05, 1039-1057

Abstract: This paper empirically investigates the impact of Foreign Direct Investment (FDI) on inequality using a panel data set of 65 developing counties. While the existing literature mainly examines the impact of FDI on growth, this study explores the importance of domestic conditions of the host countries in determining the distributional effects of FDI. The results show that the impact of FDI is not homogenous on host countries as FDI inflows exert inequality-narrowing effect only in countries that have stronger investment in human capital, better financial sector and a high level of economic development. While FDI accentuates not ameliorates inequality in countries with low level of economic development, findings of the study are robust to the use of different specifications, different estimation methods, inclusion of regional effects and time specific effects.

Keywords: FDI; economic development; inequality; developing countries (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (5)

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DOI: 10.1142/S0217590815500678

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