The Effect of Globalization on National Income Inequality (original) (raw)

The Effect of Foreign Investment on Economic Development and Income Inequality

2002

In this paper, we assess the effect of globalization on the distribution of income within countries, focussing on the influence of foreign direct investment. We analyze data for 72 countries, 1970-90. We incorporate in our tests the Kuznets (1955) curve, measures of the character of political institutions, and various aspects of the economy and society that have been emphasized in recent research. Our results are easy to summarize. Globalization has little effect on income inequality within countries. The ratio of foreign direct investment stock to gross domestic product is unrelated to the distribution of income. Income inequality in developing and developed countries is unaffected by the presence of multinational corporations. Nor are alternative measures of economic openness - the trade-to-GDP ratio and Sachs and Warner's (1995) measure of free trade policy - associated with greater inequality. The share of income received by the poorest 20% of society in particular is not in...

Globalization, Income Inequality and Income Distribution: New Evidences from Developed Countries

2017

The main purpose of this paper is investigating the dynamics of income inequality and globalization with emphasis on laber market inequality in data covering 13 developed countries over the period of 1995-2016. The paper uses Panel cointegration test and Fully Modified Ordinary Least Squares method to determine the long run relationship between Globalization, Inequality in income, FDI and income inequality indices. The results suggest that globalization did increase the inequality of gross wages. In addition, both trade openness and outward foreign direct investments had a positive effect on gross income inequality, but inward FDI did not have an effect. On the other hand, when looking at the effects of globalization on the net income inequality, results differed. An increase in outward and inward FDI will decrease the net income inequality. Technological progress, on the other hand, had only a significant positive effect on the net income inequality. Moreover, results showed that a...

The Globalization-Inequality Nexus: A Comparative Study of Developed and Developing Countries

IOSR Journal of Economics and Finance (IOSR-JEF), 2023

This study examines the relationship between globalization and income inequality, utilizing panel data spanning from 1992 to 2020.Globalization is measured by the World Bank's global-link indicators such as FDI, Remittance, Trade Openness, and Migration while income inequality is measured by Gini Coefficientand the median income of 50% of the population. The fixed effect panel data analysis provides empirical evidence indicating that globalization tends to reduce income inequality, though its impact varies between developed and developing countries. The analysis reveals a strong negative correlation between net foreign direct investment (FDI) inflows and inequality in developing countries, while no such relationship was found for developed countries.The relationship holds even if we consider an alternative measure of inequality. However, when dividing countries by developed and developing groups, no statistically significant relationship was observed.Policymakers can use these findings to support efforts to increase FDI, trade, tourism, and migration to promote growth and reduce income inequality.

Impact of Globalization on Income Distribution Inequality in 60 Countries: Comments

Global Economy Journal, 2000

In a recent article in the Global Economy Journal, Lei Zhou, Basudeb Biswas, Tyler Bowles and Peter J. Saunders (2011) have shown that globalization does not contribute to income inequality in a sample of 60 countries. In this comments we have demonstrated that their conclusion is misleading for improperly pooling countries with extremely different economic systems in their regression analyses. Specifically, only countries with sufficiently high level of development could expect to benefit from globalization as far as income distribution is concerned.

Globalization and Income Inequality

2007

This paper discusses the distributive consequences of trade flows in developing countries (DCs). On the theoretical side, we argue that the interplays between international openness and technology adoption may constitute an important mechanism leading to a possible increase of income differentials in the liberalizing DCs, trough skill enhancing trade. We use a dynamic specification to estimate the impact of trade on within-country income inequality in a sample of 70 DCs over the 1980-1999 period. Our results suggest that total aggregate trade flows are weakly related with income inequality. However, once we disaggregate total trade flows according to their areas of origin/destination, we find that trade with high income countries worsen income distribution in DCs, both through imports and exports. This finding provides a preliminary support to the hypothesis that technological differentials between trading partners are important in shaping the distributive effects of trade openness....

Impact of Globalization on Income Distribution Inequality in 60 Countries

Global Economy Journal, 2000

This paper investigates the impact of globalization on income inequality distribution in 60 developed, transitional, and developing countries. Using Kearney's (2002, 2003 and 2004) data and principal component analysis (PCA), two globalization indices are created. One of these indices is the equally weighted index. The other index is derived from the principal component analysis. The Gini coefficient of a country is regressed on each index, respectively, in all 60 test cases. The main contribution of this paper is its finding of a negative relationship between both globalization indices and the Gini coefficient for all 60 countries under investigation. Furthermore, test results indicate that this relationship is robust. Therefore, the empirical evidence presented in this paper supports the claim that globalization helps reduce income distribution inequality within countries.

Globalization and Inequality Among Nations

2008

The gap between the average income per capita levels of the poorest and the richest nations has increased during the recent eras of globalization. This paper reviews the evidence on the determinants of the disparities in per capita incomes, which has focused on the role of institutions in fostering development. Institutions primarily reflect domestic conditions, but globalization may have an impact on their development. Globalization also has direct effects on

The relationship between income inequality and globalization

Conference on Inequality, Poverty and Human Well- …, 2003

In this paper we present two composite indices of globalization. The first one is based on the Kearney/Foreign Policy Magazine and the second one is obtained from principal component analysis. They indicate which countries have become most global and show how globalization has developed over time. The indices are composed of four components: economic integration, personal contact, technology and political engagement each generated from a number of variables. A break down of the index into major components provides possibilities to identify sources of globalization and associate it with economic policy measures. The empirical results show that the low rank of globalization process is due to the political and personal factors with limited possibility for the developing countries to affect. The highly ranked developed countries are sharing similar patterns in the various components distribution. The indices were also used in a regression analysis to study the causal relationship between income inequality and globalization. Globalization indices explain only 7 to 11 percent of the variations in income inequality among the countries.

The Effects of Globalization on World Income Inequality

Globalization is defined as the transfer or easy flow of goods, services and capital from one country to another. Due to this rapid transfer in trade across boundaries, this article attempts to bring out the relationship that exists between globalization and income inequality levels across regions, and among individuals within different countries. To do this the article brings clearly the empirical evidence that various economic researchers have come up with, and most important is that there are various schools of thought giving different view points in so far as this relationship is concerned. Therefore this article seeks to give a comprehensive look in the various view points, and through empirical evidence comes up with a rational and factual analysis on the effects that globalization has on income inequality.

Relationship between Globalization and Inequality in Different Economic Blocks

2000

Now many scholars debate the different impacts of globalization on the economic behaviors of all nations, that globalization reduces or increases poverty, raises or drops wages and labor standards in societies and so on. Accordingly, we make in particular a question whether globalization affects income inequality in countries worldwide.