Foreign direct investment, inequality, and macroeconomic stability on the eve of the COVID-19 crisis

Abstract

This chapter examines the relationship between Foreign Direct Investment (FDI) and levels of income inequality. It focuses on the period following the Great Recession to understand the role of changing institutional set up in the global financial sector and the world economy after the 2007 crisis. A quantitative analysis of a panel of developed and developing countries is undertaken, investigating trends in income inequality, balance of payments, and the outflows and inflows of FDI over time. The analysis considers measures of both within-country and between-country income inequality, paying explicit attention to regional differences in the analysed phenomena. The quantitative study in the chapter is interpreted through the lens of a textual analysis of the institutional changes in the global economy after the 2007 crisis and in the wake of the COVID19 pandemic