Technology, Trade, Foreign Direct Investment and Income Inequality Nexus in GCC Countries

The purpose of this study is to analyze the nexus between Technology, Foreign Direct Investment, Trade and Income Inequality in GCC countries. The study used the panel dataset of GCC countries from the period of 1990 to 2021. The dependent variable used in a model is Income Inequality as measured by the GINI coefficient, while explanatory variables are GDP per capita growth, GDP per capita squared, foreign direct investment, inflation rate, unemployment rate, secondary school enrollment, trade, and information and communication technology. Different econometric techniques such as ARDL, Cross-Section, and Granger causality test are applied for data analysis. The Panel ARDL technique is used to estimate the results in which GDP per capita growth, inflation rate, unemployment rate, and information and communication technology index are positively and significantly related to income inequality while the variables square of GDP per capita, FDI, secondary school enrolment, and trade are negatively and significantly associated to the income inequality in GCC countries. Panel ARDL short-run outcomes found that the coefficient of the ECT (-1) is negative and also statistically significant. This indicates that 33.51 percent of errors are corrected when moving from the short-run to the long-run equilibrium. Panel Granger causality analysis found that there is a unidirectional causality between income inequality and GDP Per Capita, trade. There is no evidence of a causal relationship between income inequality and foreign direct investment, inflation, unemployment, secondary school enrolment, trade, the information and communication technology index. Additionally, there is no evidence of a causal relationship between the latter two variables and income inequality. Considering the study's findings, it is determined that technology, economic growth, unemployment, and inflation are encouraging income inequality in GCC countries while FDI and trade are playing an imperative role in declining the level of income inequality in GCC countries.