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Foreign Direct Investment and Income Inequality in Nigeria

Author: MUSIBAU ADETUNJI BABATUNDE
Published in IJED, Vol. 11 No. 2

This study investigated the effects of inward FDI on income inequality in Nigeria between 1980 and 2016. We applied the symmetric ARDL and the asymmetric NARDL methods to investigate the short-run and long-run relationships with and without structural breaks. The unit root tests revealed that the series are integrated of different order while the Bound test confirmed cointegration among the variables. The short run symmetric model revealed that past FDI inflows has the potential to reduce income inequality. The short run asymmetric model also showed that positive FDI shocks reduce income inequality while negative FDI shocks increases income inequality. While the long run symmetric ARDL supported the result, the long run asymmetric models were inconclusive. In addition, empirical suggested that the relationship between FDI and income inequality is a short run phenomenon. In addition, the presence of structural break has no significance in explaining the asymmetric impact of FDI on income inequality. Finally, the analysis revealed that inequality increases with population growth and reduces with increased domestic investment.

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