Inter-provincial income inequality and FDI in China

Abstract: Income inequality in China is a topic widely discussed in the literature. So are globalization, and the continuous increase in the presence of foreign direct investment on the world market. This paper uses data from the Chinese statistical yearbooks, to conduct an empirical analysis, based on panel data, to research if there is a relationship between the increasing levels of inter-provincial inequality in China, and the presence of foreign direct investment. The results indicate that the presence of foreign direct investment do influence the provincial variations in income, as well as China’s Gini coefficient, over the years of 1992 to 2010. These results points at, that the presence of foreign direct investment has a negative impact on the level of inter-provincial inequality in China.