Foreign direct investment and income inequality: Human capital matters

Shu Chin Lin, Dong Hyeon Kim, Yi Chen Wu

Research output: Contribution to journalArticlepeer-review

39 Citations (Scopus)


This paper empirically examines whether human capital defines the association between foreign direct investment (FDI) and income inequality. Rather than focusing on one country or region, we investigate with a broad cross section of countries to address parameter heterogeneity across countries. Using the instrumental variable threshold regressions approach, we find a significant threshold level of human capital, below which FDI exerts a disproportionately positive (negative) impact on the relatively poor (rich) and hence improves income distribution. Beyond this critical level, however, FDI benefits (harms) the nonpoor (nonrich) most and thus exacerbates income inequality.

Original languageEnglish
Pages (from-to)874-896
Number of pages23
JournalJournal of Regional Science
Issue number5
Publication statusPublished - 2013 Dec

ASJC Scopus subject areas

  • Development
  • Environmental Science (miscellaneous)


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