DOES FDI DIMINISH LOCAL EDUCATION SPENDING INEQUALITY? AN ANALYSIS OF US PANEL DATA 1992-2002

A significant education and economic literature worries about the within-state inequality in public school spending, while the studies focus on the impacts of state constitution and political structure. Motivated by the literature and recent research on the effect of FDI on public education provision, this paper is the first to examine the impact of FDI on public school resource inequality within a state empirically. Using the US state-level panel data from 1992 to 2002 and a GMM estimation approach to control for unobservable state fixed-effects, time series issues, and endogeneity, the findings of the paper suggest that a 1-percent increase in the ratio of foreign employment relative to state non-farm employment is associated with the decrease in the within-state public school spending inequality by 5.2 percent on average. Thus, FDI contributes not only to increase jobs at state level but also to diminish inequality in public school spending within the state.