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Foreign direct investment and income inequality in China

Furong Jin

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Abstract

This paper examines the impact of foreign direct investment\n\n(FDI) on Chinas income inequality. Two measures of inequality\n\nare used in this study: inequality within the urban community and\n\nthe urban-rural income gap. Data covering 25 provinces from\n\n1990 to 2006 are analyzed using the following techniques: fixed\n\neffects, random effects, and system GMM. This study finds that:\n\n(1) FDI significantly increases urban inequality and the distributional\n\neffect of FDI on urban inequality is robust in all the techniques\n\nand different measures of FDI used. (2) there is no evidence that\n\nFDI widens income disparity between urban and rural areas.

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What this paper is about

This paper examines the impact of foreign direct investment\n\n(FDI) on Chinas income inequality. Two measures of inequality\n\nare used in this study: inequality within the urban community and\n\nthe urban-rural income gap. Data covering 25 provinces from\n\n1990 to 2006 are analyzed using the following techniques: fixed\n\neffects, random effects, and system GMM. This study finds that:\n\n(1) FDI significantly increases urban inequality and the distributional\n\neffect of FDI on urban inequality is robust in all the techniques\n\nand different measures of FDI used. (2) there is no evidence that\n\nFDI widens income disparity between urban and rural areas.

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Available abstract

This paper examines the impact of foreign direct investment\n\n(FDI) on Chinas income inequality. Two measures of inequality\n\nare used in this study: inequality within the urban community and\n\nthe urban-rural income gap. Data covering 25 provinces from\n\n1990 to 2006 are analyzed using the following techniques: fixed\n\neffects, random effects, and system GMM. This study finds that:\n\n(1) FDI significantly increases urban inequality and the distributional\n\neffect of FDI on urban inequality is robust in all the techniques\n\nand different measures of FDI used. (2) there is no evidence that\n\nFDI widens income disparity between urban and rural areas.

Key concepts: Foreign direct investment, Inequality, Economic inequality, Economics, Income inequality metrics, China, Income distribution, Demographic economics

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