Inward and Outward Foreign Direct Investment and Inequality: Evidence from a Group of Middle-Income Countries

Abstract

Using panel data of a group of 39 middle-income countries over 1981–2006, this paper examines how globalization in general and inward and outward FDI in particular affects inequality. Depending on geographical region and economic system, each component of globalization affects inequality in three groups of countries in different ways: open to inward FDI tends to affect income distribution adversely in transition economies and Latin American countries, but marginally improves income distribution in countries of the reference group. In contrast, open to outward FDI is positively associated with inequality in the reference group whereas negatively associated with that of the other two groups of countries. Crucially, improvement in human capital appears to be the single most reliable way to reduce inequality.

Does economic globalisation affect income inequality? A meta‐analysis

“…where INEQ is a measure of income inequality (see Section 4 on how we distinguish between different inequality measures), ECONGLOBAL is a measure of economic globalisation, Z is a vector of other explanatory variables, and is the error term. For example, papers that used globalisation measures that do not exclusively consider the dimension of economic globalisation but a hybrid measure with political and/or social dimensions had to be excluded (e.g., Huang, Teng, & Tsai, 2016). Likewise, we did not include studies that focussed on the impact of globalisation on regional inequality (e.g., Ma, 2006) or other non‐relevant inequality measures as the dependent variable.…”

FDI outflows and international trade nexus: Empirical evidence from country income groups

“…According to the United R- ECONOMY, 2022, 8(4), 340-355 doi: 10.15826/recon.2022.8.4 In the last four decades, there has been a substantial debate on whether the relationship between international trade and OFDI is complementary or substitutive. Many empirical studies have examined this relationship in different strand of literatures using single country analysis (Rehman & Noman, 2021;Greaney & Kiyota, 2020;Tham et al, 2018;Chiappini 2016), group analysis for developed and developing countries (Sabir et al, 2019), as well as literature examining FDI inflow in country income (Joshua et al, 2020;Araujo et al, 2017;Huang et al, 2016). This has led to inconclusive results in large numbers of empirical studies.…”