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Foreign direct investment and inequality in developing countries: Does sector matter?
Author(s) -
Bogliaccini Juan A.,
Egan Patrick J. W.
Publication year - 2017
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/ecpo.12098
Subject(s) - foreign direct investment , inequality , economics , tertiary sector of the economy , economic inequality , developing country , investment (military) , international economics , demographic economics , labour economics , macroeconomics , economic growth , political science , economy , mathematical analysis , mathematics , politics , law
Abstract Scholars have studied the relationship between inward foreign direct investment ( FDI ) and within‐country income inequality in cross‐national contexts, but have not empirically investigated how FDI in different sectors might affect inequality in different ways. We use error correction models to analyze sectoral FDI data compiled from UNCTAD investment reports in 60 middle‐income countries from 1989 to 2010, arguing that FDI in services is more likely to be associated with inequality than FDI in other sectors. We argue that skill biases and changes in employment patterns associated with service sector investments can help explain these findings.