FDI and Inequality in Vietnam: An Approach with Census Data

43 Pages Posted: 12 Dec 2016

See all articles by John McLaren

John McLaren

University of Virginia; NBER

Myunghwan Yoo

University of Virginia - Department of Economics

Date Written: December 2016

Abstract

We investigate the effects of inward FDI on income distribution and absolute living standards in Vietnam using census data from 1989-2009. We compute the number of employees of foreign establishments in each of Vietnam's provinces for each year, and use that as a measure of local FDI. We estimate the effects of FDI on local households' living standards as reported in the data, broken down by educational background to allow us to analyze effects on inequality. Estimates based on the repeated cross section indicate that rising FDI in a province is associated with a slight decline in living standards for households there if they do not have a member employed by the foreign enterprises, with only modest gains for households who do have a member employed by the foreign enterprises. These estimates may reflect composition effects, however, since we find large movements of people toward the provinces receiving the FDI. The findings show that measuring the effect of FDI on household welfare is more difficult than measuring the effect of trade policy, and may pose a difficulty for the view of FDI as a general anti-poverty strategy.

Suggested Citation

McLaren, John and Yoo, Myunghwan, FDI and Inequality in Vietnam: An Approach with Census Data (December 2016). NBER Working Paper No. w22930. Available at SSRN: https://ssrn.com/abstract=2883967

John McLaren (Contact Author)

University of Virginia ( email )

P.O. Box 400182
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NBER

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Myunghwan Yoo

University of Virginia - Department of Economics ( email )

237 Monroe Hall
P.O. Box 400182
Charlottesville, VA 22904-418
United States

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