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FDI and income inequality: Evidence from Latin American economies

Dierk Herzer, Philipp Hühne and Peter Nunnenkamp

No 1791, Kiel Working Papers from Kiel Institute for the World Economy (IfW)

Abstract: We analyze whether foreign direct investment (FDI) has contributed to the typically wide income gaps in five Latin American host countries. We perform country-specific and panel cointegration techniques to assess the long-run impact of inward FDI stocks on income inequality among households in Bolivia, Chile, Colombia, Mexico and Uruguay. The panel cointegration analysis reveals a significant and positive effect on income inequality. Furthermore, FDI contributed to widening income gaps in all individual sample countries, except for Uruguay. Our findings are robust to the choice of different estimation methods. There is no evidence for reverse causality.

Keywords: FDI; income inequality; cointegration techniques; Latin America (search for similar items in EconPapers)
JEL-codes: F21 D31 (search for similar items in EconPapers)
Date: 2012
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Related works:
Journal Article: FDI and Income Inequality—Evidence from Latin American Economies (2014) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1791

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