Abstract:

In the process of globalization, which has been taking place at a great speed since the last 30-40 years, direct foreign investments have played an important role as one of the important instruments of globalization. According to the classical theory of economics, globalization and the positive effects of foreign direct investments on income distribution are discussed. In literature, the study has shown different results. While some studies showed positive effects, some studies showed negative effects. In addition, there are studies that have concluded that globalization and foreign direct investments have no impact on income inequality. The main objective of the study is to use the annual data from 1980 to 2014 and to analyze the dynamic panel data that shows whether globalization and direct foreign investments in 16 developed countries have a negative impact on income inequality. The results of the analysis show that globalization increases income inequality. When analysed by different models, economic globalization and foreign direct investments have been shown to reduce income inequality, social and political globalization has been the cause of increased income inequality. These findings show that the economic policies that the countries will implement to benefit from globalization and protect against their negative impacts are increasingly important.