Title: Inequality in Laos and the role of FDI

Authors: Vanthana Nolintha; Lau Sim Yee

Addresses: National Economic Research Institute, Souphanouvong Avenue, Sikottabong District, Vientiane Capital, Laos ' Faculty of Economics and Business Administration, Reitaku University, 2-1-1 Hikarigaoka, Kashiwa-shi, Chiba-ken 277-8686, Japan

Abstract: The paper examines the changes in inequality in Laos between 2002/03 and 2007/08 when there was a rapid influx of FDI. The empirical findings show that both inequalities in consumption expenditure and in assets have risen in this period. Inequality rates in assets are higher and have grown faster in Laos. Within group inequality continues to be the major source of inequality in consumption expenditure whereas between-group inequality is the major cause of variation in assets. This study substantiates the fact that there is a weak negative relationship between FDI and inequality in Laos. Although the relationship between growth and inequality in Laos might be moving along the Kuznets curve, the problem of inequality should not be neglected in the development agenda of Laos because improvement in income distribution reduces poverty. Therefore, this paper proposes region specific and broad-based policies as the keys to reducing inequality in Laos.

Keywords: inequality decomposition; consumption expenditure; asset inequality; foreign direct investment; FDI; poverty; Laos; economic growth; economic development; income distribution.

DOI: 10.1504/IJEPEE.2016.079125

International Journal of Economic Policy in Emerging Economies, 2016 Vol.9 No.3, pp.226 - 247

Published online: 14 Sep 2016 *

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