Bridging the Regional Divide - The Impact of FDI on Economic Inequality
Bridging the Regional Divide - The Impact of FDI on Economic Inequality

Summary/Abstract: The connection between foreign direct investment (FDI) and regional disparities is a current issue today in the context of the dynamics of the global financial landscape. This relationship is a complex one and varies according to countries' economic, historical, social and cultural context, level of development, and specific influencing factors. FDI can promote economic growth, but the positive impact depends on a number of elements, such as human capital, financial development, economic freedom, etc. The existing literature emphasises that the effects of FDI over time have not been uniform. Thus, in countries or regions with high incomes and strong institutions, the benefits are clearer and more consistent. But in economies with structural problems, the effect may be weak or even negative. Based on such considerations, our study aims to explore the impact of foreign direct investment on regional economic disparities in Romania, in the context of complex global capital mobility and geopolitical challenges. To quantify the effect of FDI on regional inequality, an econometric linear regression model with the Gini coefficient as the dependent variable was used. The results show that, while foreign direct investment and GDP growth individually contribute to reducing inequality, their interaction can exacerbate disparities, particularly in the absence of absorptive capacity and equitable policy frameworks.

• Details
• Contents