Inward & Outward FDI Stocks and Income Inequality : An Empirical Investigation

This study examines the impact of FDI on Gini index, which is one of the most used indicators of social and economic conditions, applying more than 100 countries for the period through 1993 to 2004. The paper particularly intends to verify the impact of the inward & outward FDI stocks on income inequality. The study reveals that the inward & outward FDI stocks significantly effect on widening the gap of income distribution. In addition, it turns out that inward FDI stock has more significant effect on widening income gap than outward FDI stock does. The regression results show that trade openness reduces income gap, but this effect is diminished with further increase in outward FDI stock. The study also finds that the effect of inward & outward FDI stocks on income distribution differs from the regions and levels of development. In case of the developed countries, it turns out that income inequality shrinks with inward FDI stock.