Foreign direct investment and intra-sectoral income inequality in the Brazilian manufacturing industry

Abstract

This paper aims to analyze the relationship between foreign direct investment (FDI) and intraindustrial inequality of wage income in the Brazilian manufacturing industry. We analyze 19 sectors in the period from 2007 through 2014, in order to reach the proposed objective the dynamic panel data econometric procedure is used. The estimated indicate that FDI is statistically significant and, on average, contributes to the reduction of income inequality. We also note the non-linear effect of FDI on the income inequality. Regarding the control, education variables showed a positive signs and were statistically significant, indicating that the sectors with the highest level of human capital have higher wage level. Thus, inequality reduction policies must consider the inflow of FDI in order to get a decrease in income inequality.