FDI and income inequality: evidence from a panel of US states

Pandej Chintrakarn, Dierk Herzer and Peter Nunnenkamp

No 1579, Kiel Working Papers from Kiel Institute for the World Economy

Abstract: This study employs state-level panel data to explore the relationship between inward foreign direct investment (FDI) and income inequality in the United States. Using panel cointegration techniques that allow for cross-sectional heterogeneity, cross-sectional dependence, and endogenous regressors, we find that the short-run effects of FDI on income inequality are insignificant or weakly significant and negative. In the long run, however, FDI exerts a significant and robust negative effect on income inequality in the United States. This result for the United States as a whole does not imply that FDI narrows income gaps in the long run in each individual state. There is considerable heterogeneity in the long-run effects of FDI on income inequality across states, with some states (21 out of 48 cases) exhibiting a positive relationship between FDI in income inequality.

Keywords: FDI; Inequality; Panel Cointegration; United States (search for similar items in EconPapers)
JEL-codes: C23 D31 F21 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Journal Article: FDI AND INCOME INEQUALITY: EVIDENCE FROM A PANEL OF U.S. STATES (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1579

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