We investigate the effects of inward FDI on income distribution and absolute living
standards in Vietnam using census data from 1989-2009. We compute the number of
employees of foreign establishments in each of Vietnam’s 79 provinces for each year, and
use that as a measure of local FDI. We estimate the effects of FDI on local households’
living standards as reported in the data, broken down by educational background to allow
us to analyze effects on inequality. Estimates based on the repeated cross section indicate
that rising FDI in a province is associated with a decline in living standards for households
there if they do not have a member employed by the foreign enterprises, with only modest
gains for households who do have a member employed by the foreign enterprises. These
estimates may reflect selection effects if foreign enterprises hire the most able workers. By
contrast, estimates based on a small subset of households observed more than once, which
allow us to control for household fixed effects, indicate a very strong positive effect of foreign
hiring on households without a foreign-sector employee, but these are likely overestimates
due to endogenous location decisions. The findings show that measuring the effect of FDI
on household welfare is more difficult than measuring the effect of trade policy, and may
pose a difficulty for the view of FDI as a general anti-poverty strategy.