Acta Universitatis Danubius. Œconomica, Vol. 14, No. 2 - part 4
Abstract
This study related the influence of foreign direct investment inflow on income inequality in
South Africa. The paper applied the co-integration regression and used the FDI inflow and income
inequality data in South Africa for 2005-2015 to determine. Findings from the Augmented Dickey-
Fully (ADF) test showed that increase in FDI inflow has (nonetheless not significant) broadened
inequality in South Africa during the period of analysis. In addition, a test for a unit root in uhat
arising from the Engle-Granger co-integration relationship test applied the Augmented Dickey-Fuller
test. The result indicates that, within the time series examined, there is no long-run relationship
between income inequality and foreign direct investment inflow to South Africa. The paper
recommends that further research should examine likely effect of governance on income inequality by
introducing governance variable into the co-integration regression model to see whether democratic
governance in South Africa may have contributed in widening income inequality. Further research
might also examine the characteristics of foreign direct investment inflow into the country to see
whether it possesses certain attributes such as manufacturing FDI, which could create job for local
citizens.
References
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Chapter for Encyclopedia of International Economics and Global Trade. Available at:
http://www.hbs.edu/faculty/Publication%20Files/FDICapital_Formatted_20170922_Final_W_c7fcb8
2c-f318-4632-a589-20118eaeebf8.pdf. Accessed on 26 January 2018.
Asteriou, D., Dimelis, S. & Moudatsou, A. (2014). Globalization and Income Inequality: A Panel
Data Econometric Approach for the EU27 Countries. Economic Modelling, 36, 592-599.
Diyamett, B. & Mutambla, M. (2014). Foreign direct investment and local technological capabilities
in least developed countries: Some evidence from the Tanzanian manufacturing sector. African
Journal of Science, Technology, Innovation and Development, 6(5):401-414.
Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., & Tsounta, E. (2015).
Causes and consequences of income inequality: a global perspective. International Monetary Fund
http://www.imf.org/~/media/Websites/IMF/Imported/external/pubs/ft/sdn/2015/_sdn1513pdf.ashx.
Farhan, M.Z.M., Azman-Saini, W.N.W., & Law, S. H. (2014). FDI and Income Inequality in
ASEAN-5 Countries: A Quantile Regression Approach. PersidanganKebangsaanEkonomi Malaysia,
ke-9 (PERKEM ke-9):601-608.
Hamdani, H.A. (2016). FDI, Economic Performance and Technological Spillover Effects: Evidence
from UAE. Available at: https://pet2017paris2.sciencesconf.org/146548/document. Accessed on 26
January 2018.
Herzer, D., & Nunnenkamp, P. (2011). FDI and income inequality: Evidence from Europe (No.
1675). Kiel Working Paper. https://www.ifw-members.ifw-kiel.de/.../fdi-and-incomeinequality.../
kwp_1675.pdf
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). Foreign Direct Investment and Welfare Dynamics in Africa. Doctoral thesis.
Stellenbosch University.
Koopmans, T.C. (1965). On the concept of optimal economic growth, in Econometric Approach to
Development Planning. Amsterdam: North-Holland Publishing, 1-76.
Lucas, R.E. (1988). On the mechanics of economic development. Journal of Monetary Economics,
22: 3-42.
Lessmann, C. (2013). Foreign direct investment and regional inequality: A panel data analysis. China
Economic Review, 24, 129-149
Magombeyi, M.T. & Odhiambo, N.M. 2017. Foreign Direct Investment and Poverty Reduction.
Comparative Economic Research, 20(2):74-89.
Malindini, K. (2017). Income inequality and FDI nexus in South Africa: A time Series analysis.
Available at: hsf.org.za/resource-centre/focus/state-and.../5.inequality...south-africa.../download.
Accessed on 26 January 2018.
Msweli, P. (2015). The effect of foreign direct investment on inequality: The case of South Africa:
Doctoral dissertation, Stellenbosch: Stellenbosch University.
Mugeni, S. (2015). Foreign Investment, Democracy and Income Inequality: Empirical Evidence.
Master’s Thesis, Department of Economics, University of Ottawa.
Nyuur, R.B., Ofori, D.F., & Debrah, Y.A. (2016). The impact of FDI inflow on domestic firms’
uptake of CSR activities: The moderating effects of host institutions. Thunderbird International
Business Review, 58(2):147-159.
OECD (2017). Economic survey of South Africa, https://www.oecd.org/eco/surveys/2017-OECDEconomic-
Survey-South-Africa-overview-2017.pdf
Phillips, N. (2017). Power and inequality in the global political economy. International Affairs,
93(2):429-444.
Romer, P. (1990). Endogenous technological changes. Journal of Political Economy, 98(5): S71-
S102.
Romer, P.M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5):
1002-1037.
Rye, S. (2016). Foreign Direct Investment and its Effects on Income Inequality. Available at:
https://www.duo.uio.no/bitstream/handle/10852/53920/Rye--Suzanna-Zora.pdf?sequence=1.Accessed
on 25 January 2018.
Shamim, A., Azeem, P., & Naqvi, S. M. M. A. (2014). Impact of foreign direct investment on poverty
reduction in Pakistan. International Journal of Academic Research in Business and Social
Sciences, 4(10):465.
Sharma, B. & Abekah, J. (2017). Foreign direct investment, foreign aid and incomes inequality:
Empirical insights from African and South American countries. Transnational Corporations
Review, 9(1): doi.org/10.1080/19186444.2017.1290912.
Solow, R.M. (1956). A contribution to the theory of economic growth. Quarterly Journal of
Economics, 70(1): 65-94.
Soumaré, I. (2015). Does FDI improve economic development in North African countries?. Applied
Economics, 47(51):5510-5533.
Sjö, B (2011). Testing for unit roots and co-integration–guide,
https://www.iei.liu.se/nek/730A16/filarkiv/1.307105/Dfdistab8.pdf.
Statistics South Africa, (2017). Poverty on the rise in South Africa. Available at
http://www.statssa.gov.za/?p=10334. Accessed on 25 January 2018.
Trinh, N.H. (2016). The effect of foreign direct investment on income inequality in Vietnam.
International Journal of Economics, Commerce and Management, IV (12):158-173.
Ucal, M.S. (2014). Panel Data Analysis of Foreign Direct Investment and Poverty from the
Perspective of Developing Countries. Procedia - Social and Behavioral Sciences, 1101-1105.
United Nations Conference on Trade and Development, (2016). Trade and Development Report.
Available at: http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1610. Accessed on
25 January 2018.
Wakyereza, R.K.S. (2017). The Impact of Foreign Direct Investment on Economic Growth,
Employment and Poverty Reduction in Uganda. Doctoral thesis, Victoria University, Melbourne
Australia.
WordBank.2015.PovertyOverview.Availableat:Http://Www.Worldbank.Org/En/Topic/Poverty/Overv
iew. [Accessed 25 January 2018].
World Bank (2017) foreign direct invest inflow (South Africa).
https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=ZA.
Chapter for Encyclopedia of International Economics and Global Trade. Available at:
http://www.hbs.edu/faculty/Publication%20Files/FDICapital_Formatted_20170922_Final_W_c7fcb8
2c-f318-4632-a589-20118eaeebf8.pdf. Accessed on 26 January 2018.
Asteriou, D., Dimelis, S. & Moudatsou, A. (2014). Globalization and Income Inequality: A Panel
Data Econometric Approach for the EU27 Countries. Economic Modelling, 36, 592-599.
Diyamett, B. & Mutambla, M. (2014). Foreign direct investment and local technological capabilities
in least developed countries: Some evidence from the Tanzanian manufacturing sector. African
Journal of Science, Technology, Innovation and Development, 6(5):401-414.
Dabla-Norris, M. E., Kochhar, M. K., Suphaphiphat, M. N., Ricka, M. F., & Tsounta, E. (2015).
Causes and consequences of income inequality: a global perspective. International Monetary Fund
http://www.imf.org/~/media/Websites/IMF/Imported/external/pubs/ft/sdn/2015/_sdn1513pdf.ashx.
Farhan, M.Z.M., Azman-Saini, W.N.W., & Law, S. H. (2014). FDI and Income Inequality in
ASEAN-5 Countries: A Quantile Regression Approach. PersidanganKebangsaanEkonomi Malaysia,
ke-9 (PERKEM ke-9):601-608.
Hamdani, H.A. (2016). FDI, Economic Performance and Technological Spillover Effects: Evidence
from UAE. Available at: https://pet2017paris2.sciencesconf.org/146548/document. Accessed on 26
January 2018.
Herzer, D., & Nunnenkamp, P. (2011). FDI and income inequality: Evidence from Europe (No.
1675). Kiel Working Paper. https://www.ifw-members.ifw-kiel.de/.../fdi-and-incomeinequality.../
kwp_1675.pdf
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). Foreign Direct Investment and Welfare Dynamics in Africa. Doctoral thesis.
Stellenbosch University.
Koopmans, T.C. (1965). On the concept of optimal economic growth, in Econometric Approach to
Development Planning. Amsterdam: North-Holland Publishing, 1-76.
Lucas, R.E. (1988). On the mechanics of economic development. Journal of Monetary Economics,
22: 3-42.
Lessmann, C. (2013). Foreign direct investment and regional inequality: A panel data analysis. China
Economic Review, 24, 129-149
Magombeyi, M.T. & Odhiambo, N.M. 2017. Foreign Direct Investment and Poverty Reduction.
Comparative Economic Research, 20(2):74-89.
Malindini, K. (2017). Income inequality and FDI nexus in South Africa: A time Series analysis.
Available at: hsf.org.za/resource-centre/focus/state-and.../5.inequality...south-africa.../download.
Accessed on 26 January 2018.
Msweli, P. (2015). The effect of foreign direct investment on inequality: The case of South Africa:
Doctoral dissertation, Stellenbosch: Stellenbosch University.
Mugeni, S. (2015). Foreign Investment, Democracy and Income Inequality: Empirical Evidence.
Master’s Thesis, Department of Economics, University of Ottawa.
Nyuur, R.B., Ofori, D.F., & Debrah, Y.A. (2016). The impact of FDI inflow on domestic firms’
uptake of CSR activities: The moderating effects of host institutions. Thunderbird International
Business Review, 58(2):147-159.
OECD (2017). Economic survey of South Africa, https://www.oecd.org/eco/surveys/2017-OECDEconomic-
Survey-South-Africa-overview-2017.pdf
Phillips, N. (2017). Power and inequality in the global political economy. International Affairs,
93(2):429-444.
Romer, P. (1990). Endogenous technological changes. Journal of Political Economy, 98(5): S71-
S102.
Romer, P.M. (1986). Increasing returns and long-run growth. Journal of Political Economy, 94(5):
1002-1037.
Rye, S. (2016). Foreign Direct Investment and its Effects on Income Inequality. Available at:
https://www.duo.uio.no/bitstream/handle/10852/53920/Rye--Suzanna-Zora.pdf?sequence=1.Accessed
on 25 January 2018.
Shamim, A., Azeem, P., & Naqvi, S. M. M. A. (2014). Impact of foreign direct investment on poverty
reduction in Pakistan. International Journal of Academic Research in Business and Social
Sciences, 4(10):465.
Sharma, B. & Abekah, J. (2017). Foreign direct investment, foreign aid and incomes inequality:
Empirical insights from African and South American countries. Transnational Corporations
Review, 9(1): doi.org/10.1080/19186444.2017.1290912.
Solow, R.M. (1956). A contribution to the theory of economic growth. Quarterly Journal of
Economics, 70(1): 65-94.
Soumaré, I. (2015). Does FDI improve economic development in North African countries?. Applied
Economics, 47(51):5510-5533.
Sjö, B (2011). Testing for unit roots and co-integration–guide,
https://www.iei.liu.se/nek/730A16/filarkiv/1.307105/Dfdistab8.pdf.
Statistics South Africa, (2017). Poverty on the rise in South Africa. Available at
http://www.statssa.gov.za/?p=10334. Accessed on 25 January 2018.
Trinh, N.H. (2016). The effect of foreign direct investment on income inequality in Vietnam.
International Journal of Economics, Commerce and Management, IV (12):158-173.
Ucal, M.S. (2014). Panel Data Analysis of Foreign Direct Investment and Poverty from the
Perspective of Developing Countries. Procedia - Social and Behavioral Sciences, 1101-1105.
United Nations Conference on Trade and Development, (2016). Trade and Development Report.
Available at: http://unctad.org/en/pages/PublicationWebflyer.aspx?publicationid=1610. Accessed on
25 January 2018.
Wakyereza, R.K.S. (2017). The Impact of Foreign Direct Investment on Economic Growth,
Employment and Poverty Reduction in Uganda. Doctoral thesis, Victoria University, Melbourne
Australia.
WordBank.2015.PovertyOverview.Availableat:Http://Www.Worldbank.Org/En/Topic/Poverty/Overv
iew. [Accessed 25 January 2018].
World Bank (2017) foreign direct invest inflow (South Africa).
https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD?locations=ZA.
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Published
2021-06-18
How to Cite
Collective Authors. (2021). Acta Universitatis Danubius. Œconomica, Vol. 14, No. 2 - part 4: Array. Acta Universitatis Danubius. Œconomica, 14(2). Retrieved from https://dj.univ-danubius.ro/index.php/AUDOE/article/view/1163
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