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FOREIGN DIRECT INVESTMENT AND INCOME INEQUALITY: HUMAN CAPITAL MATTERS
Author(s) -
Lin ShuChin,
Kim DongHyeon,
Wu YiChen
Publication year - 2013
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/jors.12077
Subject(s) - foreign direct investment , economics , human capital , inequality , economic inequality , income distribution , distribution (mathematics) , instrumental variable , investment (military) , income inequality metrics , variable (mathematics) , demographic economics , labour economics , econometrics , macroeconomics , economic growth , mathematical analysis , mathematics , politics , political science , law
This paper empirically examines whether human capital defines the association between foreign direct investment (FDI) and income inequality. Rather than focusing on one country or region, we investigate with a broad cross section of countries to address parameter heterogeneity across countries. Using the instrumental variable threshold regressions approach, we find a significant threshold level of human capital, below which FDI exerts a disproportionately positive (negative) impact on the relatively poor (rich) and hence improves income distribution. Beyond this critical level, however, FDI benefits (harms) the nonpoor (nonrich) most and thus exacerbates income inequality.