The Effect Of Foreign Direct Investment On Urban-Rural Inequality Evidence From Within Jiangsu Province

It is sometimes asserted, based on China's aggregate statistics, that greater opennessleads to an increase in inequality. As China experienced a sharp increase in incomeinequality between urban and rural areas in the late 1990s, when at the same time ithas seen a surge in Foreign Direct Investment (FDI). This paper investigates whetherFDI contributes to urban-rural income inequality using recent FDI and income paneldata from Jiangsu province. Preliminary results suggest that controlling for initialcondition and labor skill level, FDI has a noticeable impact on urban-rural incomeinequality. Our side result shows that increasing the skill levels of labor can have adramatic effect on urban-rural inequality.