Foreign Investment Widens Inequality, but Strong States Can Curb the Gap
Foreign direct investment affects income inequality in host countries, with the impact varying based on the level of state capacity. Countries with higher state capacity can better manage the effects of FDI on income inequality. The study used data from 98 countries between 1980 and 2018 to analyze this relationship. The findings support the hypothesis that in countries with higher state capacity, the increase in income inequality due to FDI is less pronounced.