TY - JOUR
T1 - The effect of remittances and FDI inflows on income distribution in developing economies
AU - Song, Yuegang
AU - Paramati, Sudharshan Reddy
AU - Ummalla, Mallesh
AU - Zakari, Abdulrasheed
AU - Kummitha, Harshavardhan Reddy
N1 - This study received the financial support of the National Social Science Foundation (the impact of heterogeneity of regional trade in service agreements on the reconstruction of the global value chain of the manufacturing industry in China; Project No: 20BJY091) and the innovation team project of Philosophy and Social Sciences in Colleges and Universities of Henan Province (coordinated development of urban and rural areas and rural revitalization; Project No: 2021-CXTD-04).
PY - 2021/12
Y1 - 2021/12
N2 - This study aims to examine empirically the effect of remittance inflows, FDI, and economic growth on income inequality. We include financial development and trade openness as potential determinants of income inequality. We utilise annual data from 1980 to 2016 and consider a sample of 20 major remittance–receiving developing economies. The empirical results from the panel cointegration models confirm the presence of a long-run equilibrium relationship among the variables. Our results on long-run elasticities suggest that increase in FDI inflows and remittances raise income inequality, while economic growth reduces. The findings also establish unidirectional causality from economic growth to income inequality. Given these findings, we suggest that policy makers frame appropriate policies for the effective use of remittances and FDI inflows to reduce income inequality in developing economies.
AB - This study aims to examine empirically the effect of remittance inflows, FDI, and economic growth on income inequality. We include financial development and trade openness as potential determinants of income inequality. We utilise annual data from 1980 to 2016 and consider a sample of 20 major remittance–receiving developing economies. The empirical results from the panel cointegration models confirm the presence of a long-run equilibrium relationship among the variables. Our results on long-run elasticities suggest that increase in FDI inflows and remittances raise income inequality, while economic growth reduces. The findings also establish unidirectional causality from economic growth to income inequality. Given these findings, we suggest that policy makers frame appropriate policies for the effective use of remittances and FDI inflows to reduce income inequality in developing economies.
KW - Remittances
KW - FDI inflows
KW - Economic growth
KW - Income inequality
KW - Developing economies
KW - Panel data analyses
UR - http://www.scopus.com/inward/record.url?scp=85114185560&partnerID=8YFLogxK
U2 - 10.1016/j.eap.2021.08.011
DO - 10.1016/j.eap.2021.08.011
M3 - Article
SN - 0313-5926
VL - 72
SP - 255
EP - 267
JO - Economic Analysis and Policy
JF - Economic Analysis and Policy
ER -
