Foreign Direct Investment On Domestic Impact Of Regional Income Gap

Since reform and opening up, Chinese economy has sustained a continuing and rapid growth, which to some extent benefited from the introduction and use of FDI. The eastern region has the location, human capital and physical capital and other advantages that can attract a large number of FDI, while the central and western regions have only attract a little FDI. At the same time, there exits an income gap between the three regions of China and it is gradually expanding. The non-uniformity inflow of FDI has effects on the regional income gap in China. So this paper will study of how FDI influences the regional income gap and the influence degree in deep.Firstly, this paper describes theoretical basis about which FDI has effects on the regional income gap. Secondly, we analyze of the ways in which FDI influences our regional income gap from three aspects (employment structure and industrial structure, various input factors, driven by trade). In order to research the influence of FDI respectively on the income distribution of the whole country and between the east region, middle region and west region, we make an empirical analysis by using four econometric models. Then we found that FDI is the one of important factors influences the regional income gaps. At last, on the base of theoretical and empirical analysis, this paper gives some suggestions on how to reduce the regional income gaps.