DOES FDI BENEFIT ALL? EXAMINING INCOME INEQUALITY ACROSS 10 ASEAN NATIONS
DOI:
https://doi.org/10.24191/VoA.v22i1.11356Keywords:
Foreign direct investment, income inequality, gross domestic product & inflationAbstract
Foreign direct investment (FDI) is commonly known as the driver of economic growth. However, there is no clear consensus regarding its impact on income inequality. This study examines the impacts of FDI on income inequality, together with gross domestic product and inflation, in ten ASEAN countries between 2009 and 2022, using a panel ordinary least squares approach. The findings reveal a positive and significant relationship between FDI and income inequality, supported by the skill-biased technological change hypothesis, which suggests that FDI disproportionately benefits skilled labour and capital owners. On the other hand, in line with the Kuznets hypothesis, gross domestic product is found to have a negative influence on inequality, which suggests that economic growth eventually encourages a more equitable distribution of income. The findings further show that inflation has a marginally significant negative association with income inequality, suggesting that inflation's distributive impacts are complex. Overall, the study emphasizes that to promote inclusive growth, ASEAN policymakers should tailor FDI policies with a focus on institutional quality and human capital development.
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