Foreign direct investment, labour unionization and income inequality of Korea

The Korean economy has witnessed significant expansion of Foreign Direct Investment (FDI) inflows and decrease in labour unionization ratio. This article analyses their effect on income inequality during 1982-2008. The small sample cointegration test and the error correction model confirm the existence of cointegration among the concerned variables. The error correction model shows that the increasing values of FDI inflows and the decreasing labour unionization ratio have led to deterioration in income inequality.