GLOBALIZATION, INCOME INEQUALITY AND INCOME DISTRIBUTION: NEW EVIDENCES FROM DEVELOPED COUNTRIES

Year 2018, Volume: 5 Issue: 1, 87 - 106, 26.12.2017

Mohsen Mohammadi Khyareh

Abstract

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 an increase in globalization
increases the income redistribution by government. 

Keywords

Globalization; Income inequalities; Trade; FDI

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