The Impact Of Sovereign Wealth Funds Investment On Income Inequality In Host Country

Under the influence of trade protectionism and the new epidemic,the world economy has become more uncertain,international investment has contracted,and global economic growth is slow or even stagnant.In this environment,Sovereign Wealth Funds(SWFs),as investment entities with sovereign characteristics,can assume the important role of expanding international investment channels,leading international capital flows,and boosting the global economy.In view of the international discussion on SWFs,in order to better discuss the advantages and disadvantages of SWFs investment for host countries and better utilize the huge amount of single SWFs investment,this paper takes the inequality level of host countries as the research object and selects the data of 65 countries and regions from2007 to 2020 as the sample to study the impact of SWFs investment on the income inequality level of host countries.The impact of investment in SWFs on income inequality in host countries is studied.Through theoretical analysis and empirical testing,this paper analyzes the mechanism of SWFs’ investment on income inequality in host countries,mainly from the perspective of labor market mechanism,and explores the impact of SWFs’ investment on the degree of income inequality in host countries.Using fixed-effects models and differential GMM econometric models,this paper combines mechanism analysis to argue that in most host countries,the wage premiums and employment structure changes caused by SWFs investment in the labor market exacerbate inequality more than the mitigating effect of technological progress,thus ultimately leading to the deepening of inequality in host countries.On this basis,this paper finds,through heterogeneity analysis,firstly,that the different labor market structures of developed and developing countries affect the effects of SWFs in the labor market,leading to differences in the effects of SWFs investment on the degree of income inequality in host countries with different levels of economic development,and secondly,the supply structure of the labor market is explored through heterogeneity analysis of national education levels.In turn,the previous heterogeneity analysis is corroborated.Third,the heterogeneity analysis of countries with different levels of financial deepening shows that the higher the level of financial deepening,the stronger the effect of SWFs on income inequality.Therefore,developing countries should open up their markets to support and utilize investments in SWFs to create more jobs for low-skilled labor and thus improve the welfare level of the country.Developed countries should be more cautious about the investment in SWFs and make scientific decisions on the use of SWFs.For developed countries,they should take a rational view of the economic impact of SWFs investment and make full use of the resources of SWFs to promote their own technological progress,economic development and welfare improvement by optimizing education and labor supply,guaranteeing the employment level of low-skilled labor in manufacturing industry,strengthening financial supervision,and optimizing income redistribution system.