FDI and Income Inequality: Evidence from a Panel of U.S. States

14 Pages Posted: 5 Jul 2012

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

affiliation not provided to SSRN

Dierk Herzer

University of the German Federal Armed Forces - Helmut Schmidt Universität

Peter Nunnenkamp

University of Kiel

Date Written: July 2012

Abstract

This study employs state‐level panel data to explore the relationship between inward foreign direct investment (FDI) and income inequality in the United States. Using panel cointegration techniques that allow for cross‐sectional heterogeneity and cross‐sectional dependence, we find that, in the long run, FDI exerts a significant and robust negative effect on income inequality in the United States. This result for the United States as a whole does not imply that FDI narrows income gaps in each individual state. There is considerable heterogeneity in the long‐run effects of FDI on income inequality across states, with some states (21 out of 48 cases) exhibiting a positive relationship between FDI in income inequality.

JEL Classification: F21, D31, C23

Suggested Citation

Chintrakarn, Pandej and Herzer, Dierk and Nunnenkamp, Peter, FDI and Income Inequality: Evidence from a Panel of U.S. States (July 2012). Economic Inquiry, Vol. 50, Issue 3, pp. 788-801, 2012. Available at SSRN: https://ssrn.com/abstract=2100670 or http://dx.doi.org/10.1111/j.1465-7295.2011.00384.x

Pandej Chintrakarn

affiliation not provided to SSRN ( email )

Dierk Herzer

University of the German Federal Armed Forces - Helmut Schmidt Universität ( email )

Holstenhofweg 85
Hamburg, 22008
Germany

Peter Nunnenkamp

University of Kiel ( email )

D-24100 Kiel
Germany

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