Publication

This paper examines the relationship between foreign direct investment (FDI) and income inequality for a sample of ten European countries over the period 1980 to 2000. Using panel co-integration and robust causality techniques the authors found that: (1) FDI has a positive short-run effect on income inequality in Europe, (2) the long-run effect of FDI on inequality, however, is negative on average, (3) long-run causality runs in both directions and (4) there are large differences in the long-run effect of FDI on income inequality, with two countries exhibiting a positive relationship between FDI and income inequality.