The Impact of Globalization on Inequality between the Countries: An Econometric Model

This paper provides an econometric modeling of the impact of globalization on inter-­country socio-­economic inequality between developed and developing countries. The problem of globalization as a factor of inter-­country inequality is particularly relevant against the background of socio-­economic and military-­political contradictions between individual countries and blocs of countries accumulated to date. The aim of the study is to develop an econometric model to test the hypothesis that the dominant model of globalization benefits mainly developed countries, while developing countries do not benefit from globalization processes, and therefore socio-­economic inequality between the countries increases. Using panel data for the period from 1994 to 2023, a system of two simultaneous equations with fixed effects was estimated for 116 countries. Trade as the sum of exports and imports, foreign direct investment and migration were used as indicators of globalization. Gross national income per capita and unemployment were used as indicators of socio-­economic development. The method of dummy variables (including cross-­sectional variables) was used to assess the impact of globalization on inequality between the two groups of countries. According to the results of the study, the tested hypothesis was confirmed by the constructed econometric model. The significant result of the study is also the construction of an informative and universal econometric model, which makes it possible to apply this model in further research of the problem of heterogeneity and inconsistency of the impact of globalization on the socio-­economic development of different groups of countries in the world.