Foreign Direct Investment Openness and Income Classes in Europe Around the Great Recession

21 Pages Posted: 13 Jan 2022

See all articles by Philip Arestis

Philip Arestis

University of Cambridge - Department of Land Economy; University of the Basque Country

E. Bárcena‐Martín

University of Malaga

Natalia Martín-Fuentes

Universidad de Malaga

Salvador Pérez-Moreno

affiliation not provided to SSRN

Abstract

Distributional implications of capital account regulation is eminently context-specific. This paper examines the distributional effects of the openness of foreign direct investment (FDI) flows across 27 European countries over different economic environments around the Great Recession, covering the period 2007-2013. Our multi-level approach allows us to combine country-level variables and sociodemographic characteristics of individuals. Results highlight that the openness of FDI flows heterogeneously affects the income share of individual groups, especially favouring the highest income classes. This finding seems to be driven by the educational level. We argue that, despite highly educated individuals are present along the entire distribution, the openness of FDI flows favour especially the highest income classes. This biased distributional effect of the openness of FDI flows persists over the examined years regardless of the economic environment; this is so, in part, because the distribution of highly educated people is not sensitive to the business cycle.

Keywords: Foreign Direct Investment, income distribution, income classes, multilevel analysis

Suggested Citation

Arestis, Philip and Bárcena‐Martín, E. and Martín-Fuentes, Natalia and Pérez-Moreno, Salvador, Foreign Direct Investment Openness and Income Classes in Europe Around the Great Recession. Available at SSRN: https://ssrn.com/abstract=4007965 or http://dx.doi.org/10.2139/ssrn.4007965

Philip Arestis

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

University of the Basque Country

Barrio Sarriena s/n
Leioa, Bizkaia 48940
Spain

E. Bárcena‐Martín

University of Malaga ( email )

Malaga, Málaga 29004
Spain

Natalia Martín-Fuentes

Universidad de Malaga ( email )

Salvador Pérez-Moreno (Contact Author)

affiliation not provided to SSRN ( email )

No Address Available

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