Financial development and the fdi-inequality nexus

Shu Chin Lin, Dong Hyeon Kim, Yi Huey Lee

Research output: Contribution to journalArticlepeer-review

9 Citations (Scopus)


This article empirically investigates whether the link between foreign direct investment (FDI) and income inequality varies with financial development. Using a smooth transition regression model to a panel of developing and advanced countries over the period of 1976-2005, the results indicate that financial development indeed defines the relationship between FDI and inequality. FDI raises income inequality and the effect becomes stronger in magnitude with financial sophistication. The results also indicate a large variation in the FDI effect across countries and over time, contingent on financial development.

Original languageEnglish
Pages (from-to)513-534
Number of pages22
JournalContemporary Economic Policy
Issue number3
Publication statusPublished - 2015 Jul 1

Bibliographical note

Publisher Copyright:
© 2014 Western Economic Association International.

ASJC Scopus subject areas

  • Economics and Econometrics
  • General Business,Management and Accounting
  • Public Administration


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