THE IMPACT OF FOREIGN DIRECT INVESTMENT ON INCOMES INEQUALITY: CASE STUDY WESTERN BALKANS

Linda KADRIJI, Besnik FETAI, Raman ISMAILI

Abstract

The objective of this paper is to investigate empirically the impact of Foreign Direct Investment (FDI-henceforth) on income inequality for the period 2007 to 2021. Therefore, the research question is: Does FDI has an impact on income distribution? To answer this research question, we established the hypothesis that FDI has a negative impact on income inequality. For this purpose, we employ GMM (Generalized Method of Moments) model in order to check validity of hypothesis. Our findings shows that FDI has a significant effect on income inequality, that is measured by Gini-index. The effect of FDI is negative on income inequality, and statistically is significant. Therefore, the findings with GMM estimator conform the hypothesis that FDI has a positive effect on reducing inequality.

Pages: 139 - 146