CAN WE DISCERN THE EFFECT OF GLOBALIZATION ON INCOME DISTRIBUTION? Evidence from Household Budget Surveys
AbstractThe effects of globalization on income distribution within rich and poor countries are a matter of controversy. While international trade theory in its most abstract formulation implies that increased trade and foreign investment should make income distribution more equal in poor countries and less equal in rich countries, finding these effects has proved elusive. The paper presents another attempt to discern the effects of globalization by using the data from household budget surveys and looking at the impact of openness and direct foreign investment on relative income shares of low and high deciles. We find some evidence that at very low average income level, it is the rich who benefit from openness. As income level rises, that is around the income level of Colombia, Chile or Czech republic, the situation changes and it is the relative income of the poor and the middle class that rises compared to the rich. It seems that openness makes income distribution worse before making it better—or differently that the effect of openness on country’s income distribution depends on country’s initial income level.
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Bibliographic InfoPaper provided by EconWPA in its series International Trade with number 0303004.
Length: 22 pages
Date of creation: 29 Mar 2003
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income distribution; inequality; globalization;
Other versions of this item:
- Milanovic, Branko, 2002. "Can we discern the effect of globalization on income distribution? evidence from household budget surveys," Policy Research Working Paper Series 2876, The World Bank.
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- F15 - International Economics - - Trade - - - Economic Integration
- I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-04-02 (All new papers)
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