Kiel Working Papers, Kiel Institute for World Economics
No 1791:
FDI and Income Inequality - Evidence from Latin American Economies
Dierk Herzer, Philipp Hühne and Peter Nunnenkamp
Abstract: We analyze whether foreign direct investment (FDI) has
contributed to the typically wide income gaps in five Latin American host
countries. We perform country-specific and panel cointegration techniques
to assess the long-run impact of inward FDI stocks on income inequality
among households in Bolivia, Chile, Colombia, Mexico and Uruguay. The panel
cointegration analysis reveals a significant and positive effect on income
inequality. Furthermore, FDI contributed to widening income gaps in all
individual sample countries, except for Uruguay. Our findings are robust to
the choice of different estimation methods. There is no evidence for
reverse causality
Keywords: FDI, income inequality, cointegration techniques, Latin America; (follow links to similar papers)
JEL-Codes: F21,; D31; (follow links to similar papers)
38 pages, August 2012
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