Working Paper: NBER ID: w22930
Authors: John McLaren; Myunghwan Yoo
Abstract: We investigate the effects of inward FDI on income distribution and absolute living standards in Vietnam using census data from 1989-2009. We compute the number of employees of foreign establishments in each of Vietnam's provinces for each year, and use that as a measure of local FDI. We estimate the effects of FDI on local households' living standards as reported in the data, broken down by educational background to allow us to analyze effects on inequality. Estimates based on the repeated cross section indicate that rising FDI in a province is associated with a slight decline in living standards for households there if they do not have a member employed by the foreign enterprises, with only modest gains for households who do have a member employed by the foreign enterprises. These estimates may reflect composition effects, however, since we find large movements of people toward the provinces receiving the FDI. The findings show that measuring the effect of FDI on household welfare is more difficult than measuring the effect of trade policy, and may pose a difficulty for the view of FDI as a general anti-poverty strategy.
Keywords: FDI; Inequality; Vietnam; Census Data
JEL Codes: F16; F21; O24
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| rising FDI in a province (F23) | living standards (I31) |
| households without a member employed by foreign enterprises (F29) | living standards (I31) |
| households with a member employed by foreign enterprises (F23) | living standards (I31) |
| increased foreign hiring (F29) | access to basic amenities (I14) |
| higher educational attainment (I23) | living standards (I31) |