Income inequality has widened in both developed and developing countries over the past three decades of deepening globalization. It is open to debate, however, whether foreign direct investment (FDI) as one of the driving forces of globalization has contributed to larger income gaps. This study analyses the impact of FDI inflows on income inequality using panel data across Vietnam's provinces during the period 2002-2012. By applying the panel data analyses including the pooled OLS model and

more »

... d effects model, at provincial level, inward FDI in Vietnam tends to reduce income gaps by employing predominantly low-skilled workers. Similarly, secondary education and trade openness are likely to promote the equality of income distribution with the negative and statistically significant coefficients. By contrast, inflation rate, GDP per capita, and population by province tend to exacerbate the income gaps in the case of Vietnam. Domestic investment, on the other hand, has an insignificant effect on income inequality.