ABSTRACT
Foreign direct investment (FDI) is often seen as a key driver of economic growth and development, but its impact on income distribution remains still inconclusive. Thus, this served as a motivation to examine how foreign direct investment (FDI) influences income inequality in Kosovo, a country with a young population and high unemployment that shapes its economic and social patterns. The study focuses on the period from 2009 to 2019, using a Vector Error Correction Model (VECM) to explore the long-term relationship between FDI and income inequality, measured by the Gini coefficient. The findings reveal that FDI inflows have a significant impact on income inequality in Kosovo. This research tries to fill the gap in the literature by analyzing Kosovo’s unique socioeconomic, political, and demographic context. The results provide insights for policymakers seeking strategies to attract investment and promote economic growth while addressing income disparities.
REFERENCES
Bogliaccini, J. A., & Egan, P. J. (2017). Foreign direct investment and inequality in developing countries: Does sector matter? Economics & Politics, 29(3), 209–236.
Cingano, F. (2014). Trends in income inequality and its impact on economic growth. OECD Social, Employment and Migration Working Papers, No. 163. OECD Publishing. Retrieved from http://dx.doi.org/10.1787/5jxrjncwxv6j-en
Chen, C. (2016). The impact of foreign direct investment on urban-rural income inequality. China Agricultural Economic Review, 8(3), 480–497.
Chintrakarn, P., & Chen, Y. Y. (2011). Do unions impact efficiency? Evidence from the US manufacturing sector. Contemporary Economic Policy, 29(3), 431–440.
Figini, P., & Görg, H. (2011). Does foreign direct investment affect wage inequality? An empirical investigation. The World Economy, 34(9), 1455–1475.
Franco, C., & Gerussi, E. (2013). Trade, foreign direct investments (FDI) and income inequality: Empirical evidence from transition countries. The Journal of International Trade & Economic Development, 22(8), 1131–1160.
Herzer, D., & Nunnenkamp, P. (2013). Inward and outward FDI and income inequality: Evidence from Europe. Review of World Economics, 149(2), 395–422.
Jaumotte, F., Lall, S., & Papageorgiou, C. (2013). Rising income inequality: Technology, or trade and financial globalization? IMF Economic Review, 61(2), 271–309.
Jensen, N. M., & Rosas, G. (2007). Foreign direct investment and income inequality in Mexico, 1990–2000. International Organization, 61(3), 467–487.
Kaulihowa, T. (2017). Essays on FDI and welfare dynamics in Africa (Doctoral dissertation, Stellenbosch University).
Lessmann, C. (2013). Foreign direct investment and regional inequality: A panel data analysis. China Economic Review, 24, 129–149.
Sylwester, K. (2005). Foreign direct investment, growth, and income inequality in less developed countries. International Review of Applied Economics, 19(3), 289–300.
Ucal, M., Haug, A. A., & Bilgin, M. H. (2016). Income inequality and FDI: Evidence with Turkish data. Applied Economics, 48(11), 1030–1045.
Wu, X. (2005). Will foreign capital inflow alleviate income inequality? Journal of the Asia Pacific Economy, 10(4), 528–550.
World Bank. (n.d.). World Development Indicators. Retrieved from https://databank.worldbank.org/
Central Bank of Kosovo. (n.d.). Retrieved from https://bqk-kos.org/