This paper empirically tests the link between FDI and income inequality for transitional countries in Eastern Europe and Central Asia for the period of 1990 to 2002. The theoretical motivation comes from a model developed in a previous paper, which predicts that inward FDI reduces income inequality for an economy where wage earners outnumber capital owners. Using fixed effects, there is no evidence that FDI inward stocks affect overall income inequality. However, breaking the effect into its components, the statistical evidence suggests that FDI inward stocks exacerbated wage income inequality, while reducing capital income inequality.• JEL classification: F21, D31, O15•
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.