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Globalization and income inequality: A panel data econometric approach for the EU27 countries

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  • Asteriou, Dimitrios
  • Dimelis, Sophia
  • Moudatsou, Argiro

Abstract

This paper investigates the relationship between income inequality and globalization, measured with both trade and financial variables. We estimate an econometric model using appropriate panel data techniques for the EU-27 countries over the period 1995–2009. The analysis is also performed at subgroups of countries within the EU27, such as the Core, Periphery, High Technology, and the New EU Member countries. Overall, the results suggest that trade openness exerts an equalizing effect, while financial globalization through FDI, capital account openness and stock market capitalization has been the driving force of inequality in the EU-27 since 1995. The highest contribution to inequality stems from FDI. Although the trade impact remained robust, disparities were observed in the financial globalization effects within a certain group or among country groups. The recent financial crisis led to a significant rise in inequality only in the EU-periphery and the New Member states. The impact from the other control variables was either minor or insignificant.

Suggested Citation

  • Asteriou, Dimitrios & Dimelis, Sophia & Moudatsou, Argiro, 2014. "Globalization and income inequality: A panel data econometric approach for the EU27 countries," Economic Modelling, Elsevier, vol. 36(C), pages 592-599.
    • Handle: RePEc:eee:ecmode:v:36:y:2014:i:c:p:592-599
    DOI: 10.1016/j.econmod.2013.09.051
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    More about this item

    Keywords

    Income inequalities; Panel data; Financial globalization; Trade; FDI;
    All these keywords.

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • F10 - International Economics - - Trade - - - General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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