A Study on the Impacts of FDI on Inequality – Using the Spatial Econometric Approach

This study examines the impact of foreign direct investment (FDI) on inequality at the provincial level in Vietnam. The provincial Atkinson inequality index is calculated based on the Vietnam Household Living Standards Survey. Measures of provincial FDI are compiled from the Enterprise Survey dataset. The study finds that FDI can help improve income equality if it takes the form of labor-intensive investment; in contrast, if it takes the form of capital-intensive investment, it is likely to increase inequality. In addition, the study shows that spatial autocorrelation exists in the relationship between FDI and income inequality; therefore, a spatial econometric approach is required to obtain reliable estimates.