The issue of income inequality require more attention from policy makers in both developing and developed countries due to its importance. Increasing income inequality leads to political instability and social unrest which in turn negatively affects economic growth and sustainable development. The impacts of foreign direct investments (FDI) on socio-economic variables have attracted great interest of researchers in the past decades. Most studies have discussed that FDI positively affects the economy of the host country, especially the developing countries’ economies. FDI could contribute the growth and development of the host country by transfer of modern technology and human capital development, while its impact on income inequality is still controversial. Heckscher–Ohlin and Stolper–Samuelson’s theorem (HO/SS) predicts that trade openness leads to an increase in the real wages of unskilled workers and a reduction in income inequality in developing countries. The aim of this study is to explore the impacts of FDI inflows and trade openness on income inequality in Turkiye by using annual data for the period of 2000 to 2022. In the model, Gini coefficient is the dependent variable which is used as the income inequality indicator, FDI is measured with annual FDI inflows and FDI inflows as a percentage of GDP, and trade openness as the ratio of sum of total exports and imports to GDP. GDP growth rate, GDP per capita annual growth rate, education and health expenditures as percentage of GDP are also included in the model which play an important role in the FDI-trade openness-income inequality nexus. The findings of the study revealed that increase in FDI inflows and health expenditures contribute to reduction of income inequality while increase trade openness does not affect income distribution in Turkiye for the research period of 2000 to 2022. It can be concluded that the policymakers should focus on strategies for attracting FDI inflows and also focus on health expenditures in combating with income inequality. ORCID NO: 0000-0002-3249-0660, 0000-0001-7586-4610
Anahtar Kelimeler: Income Inequality, FDI, Trade Openness
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