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Trade openness, FDI, and income inequality: Evidence from sub‐Saharan Africa
Author(s) -
Xu Chenghong,
Han Mingming,
Dossou Toyo Amegna Marcel,
Bekun Festus Victor
Publication year - 2021
Publication title -
african development review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.654
H-Index - 32
eISSN - 1467-8268
pISSN - 1017-6772
DOI - 10.1111/1467-8268.12511
Subject(s) - economic inequality , foreign direct investment , openness to experience , economics , per capita income , inequality , nexus (standard) , panel data , generalized method of moments , language change , income distribution , rule of law , development economics , international economics , politics , macroeconomics , political science , psychology , mathematical analysis , social psychology , mathematics , art , demography , literature , sociology , computer science , law , econometrics , embedded system
The motivation for this study stems from the United Nations Sustainable Development Goals (UN‐SDGs) and their impact by 2030. The UN highlights 17 SDGs that address pertinent local and global issues, one of which—SDG‐10—has been devoted to reducing inequality. This study investigates the nexus between trade openness, foreign direct investment (FDI), and income inequality in sub‐Saharan Africa using panel data from 2000 to 2015 and the generalized method of moment (GMM) technique approach. The findings show that FDI and income have a negative, statistically significant relationship with income inequality, signifying that as FDI and income per capita increase, the level of income inequality decreases. However, trade openness, education, political stability, corruption, and rule of law have a positive, statistically significant relationship with inequality. This study, therefore, offers some recommendations that will help policymakers. First, develop good policies to attract more foreign investors, which will contribute to creating employment opportunities in the region. Second, create more infrastructures to provide good quality education. Third, implement a good policy to motivate local production which will contribute to creating jobs. Fourth, build a strong institution(s) to fight against corruption.