The impact of Foreign Direct Investment (FDI) on Economic Growth and Income Inequality in Developing Countries

DOI

10.2991/978-94-6463-874-5_53How to use a DOI?

Keywords

Foreign Direct Investment; Economic Growth; Income Inequality; Developing Countries

Abstract

This paper explores the impact of Foreign Direct Investment (FDI) on economic growth and income inequality in developing countries, with a focus on regions in Africa and Asia. Drawing on recent data and case studies, it examines how the volume, sectoral focus, and structure of FDI influence GDP growth, environmental outcomes, and income distribution. The analysis reveals that while FDI can be a powerful driver of development, its benefits are not guaranteed. They are contingent upon certain threshold conditions, such as adequate levels of human capital, institutional quality, and government spending. Countries with strong education systems, effective governance, and open trade policies are more likely to experience sustained economic growth and inclusive development from FDI. However, profit repatriation of FDI limits local reinvestment and undermines long-term economic resilience of developing countries, therefore exacerbating existing global inequality. Also, the environmental impacts of FDI are also mixed: while FDI in resource-rich countries often leads to higher CO₂ emissions, investments in diversified economies can support greener outcomes. For developing countries, FDI should not be viewed solely as a financial transaction, but as a potential long-term partnership for sustainable and inclusive growth.

Copyright

© 2025 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Jinjia Li
PY  - 2025
DA  - 2025/11/03
TI  - The impact of Foreign Direct Investment (FDI) on Economic Growth and Income Inequality in Developing Countries
BT  - Proceedings of the 2025 International Conference on Financial Innovation and Marketing Management (FIMM 2025)
PB  - Atlantis Press
SP  - 452
EP  - 458
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-874-5_53
DO  - 10.2991/978-94-6463-874-5_53
ID  - Li2025
ER  -