Factors affecting income inequality in developing countries

Ong, Alvin Yi Jun (2024) Factors affecting income inequality in developing countries. Final Year Project, UTAR.

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Abstract

This paper investigates factors affecting income inequality in 33 developing countries from 2015 to 2020. The factors include education level, corruption, globalization, foreign direct investment inflow (FDI) and GDP per capita. However, the unemployment rate is considered as a control variable. Nevertheless, the interaction effect between foreign direct investment inflow and GDP per capita on income inequality is substantial in these countries. Meanwhile, the empirical findings of Panel Corrected Standard Error (PCSE) indicate that FDI inflows and GDP per capita are significant determinants of increasing income inequality. FDI inflows and GDP per capita are essential in moderating the income inequality, especially in increasing the income gap when countries’ inequality is lower; however, other variables show insignificant between income inequality

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