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Income Inequality and FDI in Turkey: FM-OLS (Phillips-Hansen) Estimation and ARDL Approach to Cointegration

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  • Ucal, Meltem
  • Bilgin, Mehmet Huseyin

Abstract

This paper examines the long-run impact of foreign direct investment (FDI) on and the other determinants of income inequality in Turkey. Using a linear income inequality model, we apply the (ARDL) approach to cointegration which is more appropriate for estimation in small sample studies. The long-run results are also estimated by using the fully modified ordinary least squares (FMOLS) method. These methodologies, while proven to produce reliable estimates in small sample sizes, provide a check for the robustness of results. The data span for the study is from 1990 to 2006. The empirical results indicate the existence of a cointegration relationship among the variables. The results also point to a positive impact of FDI on income inequality which is consistent with other past studies. The positive impact of FDI growth rate on income inequality is shown to be significant in the short-run but not in the long-run.

Suggested Citation

  • Ucal, Meltem & Bilgin, Mehmet Huseyin, 2009. "Income Inequality and FDI in Turkey: FM-OLS (Phillips-Hansen) Estimation and ARDL Approach to Cointegration," MPRA Paper 48765, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:48765
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    More about this item

    Keywords

    Income inequality; foreign direct investment; FMOLS estimation; ARDL estimation; Turkey.;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

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