The impact of cross-border capital flows on the income distribution of host countries also exhibits significant heterogeneity. For instance, a study by Herzer & Nunnenkamp (2011) indicates that the short-term effect of FDI on income inequality in Europe is positive, while the average long-term impact is negative, suggesting that an increase in FDI reduces income inequality, and higher income inequality leads to a decrease in FDI inflows. Moreover, the long-term impact of FDI on income inequality shows heterogeneity. Chintrakarn et al. (2012), using panel data from U.S. states, found that in the long run, FDI has a positive effect on income inequality in the United States, but there is considerable heterogeneity in the long-term impact of FDI on income inequality across states, with FDI actually increasing income inequality in some states. Although the inflow and outflow of FDI can reduce income distribution inequality in the long term, this impact varies significantly across countries, with FDI increasing income inequality in some nations (Herzer & Nunnenkamp, 2013). Mallick et al. (2020), in a comparative study of China and India, found that both FDI and remittance inflows significantly reduced income inequality in China but exacerbated income inequality in India. Huang et al. (2020), based on a sample country's per capita GDP grouping study, showed that FDI increased income inequality among low-income groups, had no significant impact on middle-income groups, and reduced income inequality among high-income groups. That is, FDI inflows may increase income inequality with the early development of a country but ultimately reduce income distribution inequality as economic development deepens. In countries with high political, economic, and financial risks, FDI worsens income inequality, while in countries with low political, economic, and financial risks, FDI alleviates income inequality (Wang & Lee, 2021).

In summary, the academic community has not reached a consensus on the impact of cross-border capital flows on the income distribution of host countries. The vast majority of studies focus on analyzing the impact of FDI on host country income distribution, with few探讨 the impact of the other two main types of cross-border capital flows on host country income distribution. At the same time, summarizing existing research conclusions, we find that FDI is more likely to improve the income distribution of developed economies, while FDI usually has a negative impact on the income distribution of developing economies. Figini & Görg (2011), in their study of FDI and wage income inequality, suggest that FDI can be seen as a tool for introducing new technology in the host country and providing a "role model" for local enterprises. The wage income inequality brought by FDI shows two different stages for different economies. For developed economies, the gap between skilled and unskilled workers in the labor market is relatively small. As more FDI flows into the economy, domestic enterprises can more quickly imitate the advanced production technologies used by multinational companies, ultimately leading to a labor market composed entirely of skilled workers, thus narrowing the income gap. For developing economies, multinational companies introduce new technology into the host country. Due to the relatively small proportion of skilled workers in the labor market, the technological shock brought by FDI offers higher wage premiums to skilled workers, thus exacerbating the wage income inequality between skilled and unskilled workers. The labor market in developing economies often lacks sufficient skills and education levels, leading to high-paying jobs brought by FDI being concentrated among a few high-skilled workers, thereby widening the income gap (Cruz et al., 2023). In addition, FDI is often concentrated in specific economic zones or cities, causing regional development imbalances (Wei et al., 2009), with rural and underdeveloped areas potentially not receiving adequate investment and development opportunities, leading to income distribution inequality. At the same time, in some developing economies, labor laws and worker rights protection measures are relatively weak, and the alliance between international monopoly capital owners and domestic administrative power agents and domestic monopoly capital owners makes it easier for them to jointly extract income shares from low- and middle-income groups rather than compete with each other (Huang Zeqing and Chen Xiangguang, 2018). This phenomenon not only exacerbates income distribution injustice but also brings negative impacts on social stability and sustainable economic development, further intensifying income inequality. Therefore, we propose the first hypothesis of this paper.

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H1: Overall, FDI can improve the income distribution of host countries, but this impact is only valid in developed economies, and FDI will instead worsen the income distribution of emerging and developing economies.

FDI inflows can usually promote economic growth in host countries, reduce unemployment levels, and increase the share of labor income. FDI usually comes with a large amount of capital inflows, which can be used to expand production capacity, build infrastructure, and promote innovation and technological progress. At the same time, foreign investors will bring advanced management experience and technology, promoting technological upgrading and industrial upgrading in the host country through technology transfer (Fu Yuanhai and Lin Jianwei, 2021), improving production efficiency and product quality. The entry of foreign investors usually brings new industries and business areas, promoting the transformation of host countries from traditional industries to high added value, technology-intensive industries. This helps to improve the efficiency and competitiveness of the industrial structure and promote sustainable economic growth. At the same time, the implementation of FDI usually comes with business expansion and increased production demand. The investment and operational activities of foreign enterprises can create a large number of direct and indirect employment opportunities, reduce unemployment rates, and enhance the vitality of the labor market (Zhang Ting et al., 2021). By cooperating with foreign investors, the labor force in the host country can also obtain opportunities for skill training and career development, improving the quality and competitiveness of human resources. Through technology transfer and skill enhancement, labor productivity and technical levels can be improved, thereby enabling workers to争取 higher wages and salary levels (Tomohara & Takii, 2011; Liu Chen et al., 2018), which helps to increase the proportion of labor income in disposable income. The introduction of FDI usually also promotes the development of labor organizations and trade unions. Trade unions can represent employees in negotiating wage待遇 and working conditions, increasing the bargaining power of workers. The existence of labor organizations and trade unions can promote a more equitable distribution of income and increase the proportion of labor income in disposable income.

Economic growth, reduced unemployment rates, and increased labor income share in host countries obviously affect their income distribution. Brueckner et al. (2015), based on panel data from 80 countries between 1960-2007, showed that a 1% increase in per capita GDP reduced the country's Gini coefficient by more than 0.08 percentage points. Economic growth increased the income share of low percentile groups while reducing the income share of the top 20% percentile group, meaning that economic growth benefited the bottom people and the middle class. Kurniasih (2017) and Shi et al. (2022) also reached similar conclusions that economic growth brought by FDI can improve the income distribution of host countries. At the same time, an increase in unemployment rates can plunge low-income groups into poverty and expand the income share of high-income groups, thereby exacerbating income inequality (Cysne, 2009; Furceri & Ostry, 2019). Therefore, the reduction in unemployment rates brought by FDI will significantly improve income distribution. In addition, since the main source of income for low- and middle-income groups is labor income, economic growth and employment increases brought by FDI may increase the proportion of labor income in disposable income, thereby relatively reducing the proportion of property income in disposable income. Property income is an important source of income for high-income groups, so FDI may reduce the income share of high-income groups.

In summary, we propose the second hypothesis of this paper.

H2: Overall, FDI can improve the income distribution of host countries by promoting economic growth, reducing unemployment levels, and increasing the share of labor income.

II. Data Sources and Model Construction

(1) Data Sources and Variable Description

(2) Econometric Model ConstructionIII. Empirical Research

(1) Benchmark Model

(2) Robustness Test

(3) Endogeneity Discussion

(4) Heterogeneity Analysis

IV. Mechanism Test of the Impact of Cross-Border Capital Flows on Income Distribution

V. Further Research

VI. Conclusion and Policy Recommendations

In the context of economic globalization and the deep interconnection of financial markets, the impact of cross-border capital flows on economic growth, full employment, and balance of payments equilibrium in the world's major economies has become increasingly significant. At the same time, cross-border capital flows may also affect the income distribution situation in the host countries. Currently, there is no consensus in the academic community on how cross-border capital flows affect the income distribution of host countries, with heterogeneous conclusions drawn based on different samples and time spans. This paper, based on 30 years of cross-country panel data from 57 global economies, discusses how cross-border capital flows represented by FDI affect the income distribution of host countries. The main conclusions include: overall, FDI significantly optimizes the income distribution of host countries, but the impact of securities investment and other investments on income distribution is not significant; heterogeneity tests show that FDI significantly improves the income distribution of developed economies but does not improve the income distribution situation of emerging markets and developing economies; the role of FDI in promoting income distribution is more significant in economies with higher levels of financial market development and after the 2008 financial crisis; mechanism research finds that FDI improves income distribution by promoting economic growth in host countries, reducing unemployment rates, and increasing the share of labor income; further research considering the degree of capital account openness of various economies shows that FDI can only play a role in improving income distribution in economies with a higher degree of capital account openness. Based on the above research conclusions, this paper proposes the following policy recommendations for China on how to use cross-border capital flows to improve the income distribution structure:

Firstly, continue to optimize the structure of foreign capital introduction. Considering that securities investment and cross-border bank credit in cross-border capital flows have not played a role in improving income distribution, and the above two types of capital flows are highly sensitive to the global financial cycle (Tan Xiaofen and Yu Mengwei, 2021), which may trigger a reversal of capital inflows in host countries, thereby exacerbating financial risks and worsening the structure of income distribution, it is necessary to strengthen the monitoring of the structure of capital inflows. In addition, FDI introduced by China in the past was mainly concentrated in labor and resource-intensive industries, with insufficient introduction in capital and technology-intensive industries. In the current historical period when the world is facing climate change and energy revolution, FDI should be guided into strategic emerging industries rather than financial and other virtual economic sectors, optimizing the income distribution structure while creating employment and promoting growth.Secondly, steadily advance the liberalization of the capital account. The empirical research in this paper indicates that FDI can improve the income distribution of the host country only in economies with a higher degree of capital account openness. Currently, China's level of capital account openness is relatively low, with a standardized Chinn-Ito index of less than 0.2. Increasing the degree of capital account openness is beneficial for FDI to improve the income distribution of the host country. Therefore, based on the current state of China's financial market development and gradually opening the capital account is not only conducive to China's economic growth but also can improve the income distribution structure by attracting FDI. However, this process should not be rushed and needs to be effectively cushioned by monetary policy and exchange rate policy to mitigate the external shocks brought by capital account liberalization.

Lastly, continuously deepen financial market reform. According to our research conclusions, the development of the financial market has a significant impact on FDI's ability to improve the income distribution of the host country. A well-developed financial market is conducive to leveraging the role of FDI in promoting the development of the real economy and improving income distribution. On the other hand, an imperfect financial market may lead to excessive inflow of FDI into the virtual economy sector, exacerbating the wealth gap. Deepening financial market reform requires measures such as market-oriented factor pricing, increasing the proportion of direct financing, and promoting the development of inclusive finance. A well-developed financial market can not only enhance China's attractiveness to foreign capital but also amplify the improvement effect of FDI on income distribution through the inclusive characteristics of financial services, which is conducive to the realization of the great goal of common prosperity.