Foreign Direct Investment and Income Inequality: Theory, Debate and Analysis

The process of deregulation and integretion which came into existence under the title of globalisation, has led FDI to spread over a broad area. With the period when international capital mobilisation became a significant matter in global economy, there have been a serious deterioration in income distribution. In this regard, systematical analysis of relationship between FDI and income distribution has gained importance. The purpose of this study is to search the effect of FDI inflows on income distribution in selected 36 countries. In line with this purpose, the period between 1998-2007 has been examined with panel regression analysis. Findings of all equations used in this study shows that FDI inflows has been detrimental to income distribution. Another important finding of this study is, along with the invalidity of reverse U hypothesis of Kuznets, increases in trade openness and unemployment has a negative effect on income distribution