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: Income Inequality and FDI: Evidence with Turkish Data

Meltem Ucal (), Mehmet Bilgin () and Alfred Haug ()

No 1407, Working Papers from University of Otago, Department of Economics

Abstract: This paper explores how foreign direct investment (FDI) and other determinants impact income inequality in Turkey in the short- and long-run. We apply the ARDL (Auto-Regressive Distributed Lag) modelling approach, which is suitable for small samples. The data for the study cover the years from 1970 to 2008. The empirical results indicate the existence of a cointegration relationship among the variables. The positive impact of the FDI growth rate on income inequality, worsening inequality, is shown to be significant in the short-run, though at the 10% significance level only and with a quantitatively small impact, and insignificant in the long-run. In other words, FDI increases income inequality initially somewhat but this effect disappears in the long run. The literacy rate clearly reduces inequality in the long run, but also in the short run. On the other hand, population growth worsens inequality in the long run, and the effect is quite large, though it has no statistically significant effect on inequality in the short run. Also, an increase in GDP growth reduces inequality especially in the short run (at a 5% level of significance) but also in the long run (though only at the 10% level).

Keywords: Income inequality; foreign direct investment; ARDL estimation; FM-OLS estimation; Turkey (search for similar items in EconPapers)
JEL-codes: C13 C32 D31 F21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-06, Revised 2014-06
New Economics Papers: this item is included in nep-ara and nep-cwa
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http://www.otago.ac.nz/economics/news/otago078310.pdf First version, 2014 (application/pdf)

Related works:
Journal Article: Income inequality and FDI: evidence with Turkish data (2016) Downloads
Working Paper: Income Inequality and FDI: Evidence with Turkish Data (2014) Downloads
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