Foreign direct investment and income inequality revisited
This paper discusses the impact of FDI on income inequality. The theoretical ways in which FDI might influence income inequality betweencountries as well as within a given country are discussed, with special attention alsogiven to employment generation effects. Revisiting previous research we show that significant effects of FDI are hard to ... find inmore recent work, with older studies showing mixed results. Re-estimating the prominent study of Tsai (1995) with newer data we augment it byallowing for FDI-influences on inequality by region, income level, and export focus. We find no overall impact of FDI on inequality. Also region and income differentiatedestimations show no country group-specific impacts of FDI. Only in the export focusdifferentiatedestimations we find some evidence of an inequality increasing impact ofFDI in countries primarily exporting primary goods (without fuel). FDI thus do not have significant implications for income distribution in general.