The Effects of Globalisation on OECD Income Inequality: A static and dynamic analysis
AbstractUsing the World Income Inequality Database and a static and dynamic panel data analysis, this paper analyses the correlation between income inequality in the OECD countries and economic globalization, measured by trade openness and foreign direct investment, for the period 1995-2007. The static analysis, conducted by means of the fixed-effects estimator, suggests that trade openness reduces inequality, whereas FDI is positively linked to inequality. Some control variables, such as unemployment and inflation, also have a positive effect on inequality. When we control for endogeneity, using the system GMM estimator with the Windmeijer correction for small samples, the results also show that trade openness decreases income inequality and that the FDI effect on inequality is not significant. The country’s economic growth causes inequality to increase, according to the findings of both our static and dynamic analyses.
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Bibliographic InfoPaper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2011/12.
Date of creation: Jul 2011
Date of revision:
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Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
Web page: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC
Globalisation; Income inequality; Panel data. Classification-C23; D30; D63; F02.;
Find related papers by JEL classification:
- Pan - Economic Systems - - - - -
- dat - - - - - -
- Cla - Mathematical and Quantitative Methods - - - - -
- D30 - Microeconomics - - Distribution - - - General
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-09-22 (All new papers)
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