IDEAS home Printed from https://ideas.repec.org/a/bla/ecopol/v32y2020i1p104-142.html
   My bibliography  Save this article

Can social spending cushion the inequality effect of globalization?

Author

Listed:
  • Andreas Bergh
  • Irina Mirkina
  • Therese Nilsson

Abstract

This paper examines whether social spending cushions the effect of globalization on within‐country inequality. Using information on disposable and market income inequality and data on overall social spending, and health and education spending from the ILO and the World Bank/WHO, we analyze whether social spending moderates the association between economic globalization and inequality. The results confirm that economic globalization—especially economic flows—associates with higher income inequality, an effect driven by non‐OECD countries. Health spending is strongly associated with lower inequality, but we find no robust evidence that any kind of social spending negatively moderates the association between economic globalization and inequality.

Suggested Citation

  • Andreas Bergh & Irina Mirkina & Therese Nilsson, 2020. "Can social spending cushion the inequality effect of globalization?," Economics and Politics, Wiley Blackwell, vol. 32(1), pages 104-142, March.
    • Handle: RePEc:bla:ecopol:v:32:y:2020:i:1:p:104-142
    DOI: 10.1111/ecpo.12143
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/ecpo.12143
    Download Restriction: no
    File URL: https://libkey.io/10.1111/ecpo.12143?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90, National Bureau of Economic Research, Inc.
    2. Kapstein, Ethan B., 2000. "Winners and Losers in the Global Economy," International Organization, Cambridge University Press, vol. 54(2), pages 359-384, April.
    3. Jetter, Michael & Parmeter, Christopher F., 2015. "Trade openness and bigger governments: The role of country size revisited," European Journal of Political Economy, Elsevier, vol. 37(C), pages 49-63.
    4. Stephen Bond & Anke Hoeffler & Jonathan Temple, 2001. "GMM Estimation of Empirical Growth Models," Economics Papers 2001-W21, Economics Group, Nuffield College, University of Oxford.
    5. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    6. Stephen Jenkins, 2015. "World income inequality databases: an assessment of WIID and SWIID," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 629-671, December.
    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    8. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    9. Martin Ravallion, 2018. "Inequality and Globalization: A Review Essay," Journal of Economic Literature, American Economic Association, vol. 56(2), pages 620-642, June.
    10. Wood, Adrian, 1997. "Openness and Wage Inequality in Developing Countries: The Latin American Challenge to East Asian Conventional Wisdom," The World Bank Economic Review, World Bank, vol. 11(1), pages 33-57, January.
    11. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
    12. Brambor, Thomas & Clark, William Roberts & Golder, Matt, 2006. "Understanding Interaction Models: Improving Empirical Analyses," Political Analysis, Cambridge University Press, vol. 14(1), pages 63-82, January.
    13. Axel Dreher & Jan-Egbert Sturm & Heinrich Ursprung, 2008. "The impact of globalization on the composition of government expenditures: Evidence from panel data," Public Choice, Springer, vol. 134(3), pages 263-292, March.
    14. Massimo Baldini, 2001. "Inequality and Redistribution over the Life-Cycle in Italy: an Analysis with a Dynamic Cohort Microsimulation Model," Brazilian Electronic Journal of Economics, Department of Economics, Universidade Federal de Pernambuco, vol. 4(2), December.
    15. Giray Gozgor & Priya Ranjan, 2017. "Globalisation, inequality and redistribution: Theory and evidence," The World Economy, Wiley Blackwell, vol. 40(12), pages 2704-2751, December.
    16. Blanchard, Olivier J. & Summers, Lawrence H., 1987. "Hysteresis in unemployment," European Economic Review, Elsevier, vol. 31(1-2), pages 288-295.
    17. Francisco Rodríguez & Dani Rodrik, 2001. "Trade Policy and Economic Growth: A Skeptic's Guide to the Cross-National Evidence," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 261-338, National Bureau of Economic Research, Inc.
    18. François Bourguignon, 2016. "Inequality and Globalization," PSE-Ecole d'économie de Paris (Postprint) halshs-01379317, HAL.
    19. Kim, So Young, 2007. "Openness, External Risk, and Volatility: Implications for the Compensation Hypothesis," International Organization, Cambridge University Press, vol. 61(1), pages 181-216, January.
    20. Ruggie, John Gerard, 1982. "International regimes, transactions, and change: embedded liberalism in the postwar economic order," International Organization, Cambridge University Press, vol. 36(2), pages 379-415, April.
    21. Andreas Bergh & Günther Fink, 2008. "Higher Education Policy, Enrollment, and Income Inequality," Social Science Quarterly, Southwestern Social Science Association, vol. 89(1), pages 217-235, March.
    22. Günther G. Schulze & Heinrich W. Ursprung, 1999. "Globalisation of the Economy and the Nation State," The World Economy, Wiley Blackwell, vol. 22(3), pages 295-352, May.
    23. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    24. Hainmueller, Jens & Mummolo, Jonathan & Xu, Yiqing, 2019. "How Much Should We Trust Estimates from Multiplicative Interaction Models? Simple Tools to Improve Empirical Practice," Political Analysis, Cambridge University Press, vol. 27(2), pages 163-192, April.
    25. Max Roser & Jesus Crespo Cuaresma, 2016. "Why is Income Inequality Increasing in the Developed World?," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(1), pages 1-27, March.
    26. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    27. Sinn, Hans-Werner, 1997. "The selection principle and market failure in systems competition," Journal of Public Economics, Elsevier, vol. 66(2), pages 247-274, November.
    28. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 90(2), pages 231-242, June.
    29. Björn Kauder & Niklas Potrafke, 2015. "Globalization and social justice in OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 151(2), pages 353-376, May.
    30. Keane, Michael P & Wolpin, Kenneth I, 1997. "The Career Decisions of Young Men," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 473-522, June.
    31. 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.
    32. Laurence M. Ball, 2009. "Hysteresis in Unemployment: Old and New Evidence," NBER Working Papers 14818, National Bureau of Economic Research, Inc.
    33. R. Kaplinsky, 2000. "Globalisation and Unequalisation: What Can Be Learned from Value Chain Analysis?," Journal of Development Studies, Taylor & Francis Journals, vol. 37(2), pages 117-146.
    34. Deininger, Klaus & Squire, Lyn, 1996. "A New Data Set Measuring Income Inequality," The World Bank Economic Review, World Bank, vol. 10(3), pages 565-591, September.
    35. Marcel P. Timmer & Abdul Azeez Erumban & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2014. "Slicing Up Global Value Chains," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 99-118, Spring.
    36. Berggren, Niclas, 1999. "Economic Freedom and Equality: Friends or Foes?," Public Choice, Springer, vol. 100(3-4), pages 203-223, September.
    37. Barro, Robert J. & Lee, Jong Wha, 2013. "A new data set of educational attainment in the world, 1950–2010," Journal of Development Economics, Elsevier, vol. 104(C), pages 184-198.
    38. Damir Stijepic, 2017. "Globalization, Worker Mobility and Wage Inequality," Review of International Economics, Wiley Blackwell, vol. 25(1), pages 108-131, February.
    39. Florian Dorn & Clemens Fuest & Niklas Potrafke, 2017. "Globalisation and Income Inequality Revisited," European Economy - Discussion Papers 056, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    40. Niklas Potrafke, 2015. "The Evidence on Globalisation," The World Economy, Wiley Blackwell, vol. 38(3), pages 509-552, March.
    41. Cameron, David R., 1978. "The Expansion of the Public Economy: A Comparative Analysis," American Political Science Review, Cambridge University Press, vol. 72(4), pages 1243-1261, December.
    42. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    43. Down, Ian, 2007. "Trade Openness, Country Size and Economic Volatility: The Compensation Hypothesis Revisited," Business and Politics, Cambridge University Press, vol. 9(2), pages 1-20, August.
    44. Frederick Solt, 2009. "Standardizing the World Income Inequality Database," LIS Working papers 496, LIS Cross-National Data Center in Luxembourg.
    45. Stephanie Meinhard & Niklas Potrafke, 2012. "The Globalization–Welfare State Nexus Reconsidered," Review of International Economics, Wiley Blackwell, vol. 20(2), pages 271-287, May.
    46. Stephen Bond & Anke Hoeffler, 2001. "GMM Estimation of Empirical Growth Models," Economics Series Working Papers 2001-W21, University of Oxford, Department of Economics.
    47. World Bank, 2016. "World Development Indicators 2016," World Bank Publications - Books, The World Bank Group, number 23969.
    48. Hans‐Werner Sinn, 2004. "The New Systems Competition," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 5(1), pages 23-38, February.
    49. Jeffrey D. Sachs & Andrew Warner, 1995. "Economic Reform and the Process of Global Integration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(1, 25th A), pages 1-118.
    50. Teney, Céline & Lacewell, Onawa Promise & De Wilde, Pieter, 2014. "Winners and losers of globalization in Europe: attitudes and ideologies," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(4), pages 575-595.
    51. Frederick Solt, 2015. "On the assessment and use of cross-national income inequality datasets," The Journal of Economic Inequality, Springer;Society for the Study of Economic Inequality, vol. 13(4), pages 683-691, December.
    52. Scully, Gerald W, 2002. "Economic Freedom, Government Policy and the Trade-Off between Equity and Economic Growth," Public Choice, Springer, vol. 113(1-2), pages 77-96, October.
    53. Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
    54. Down Ian, 2007. "Trade Openness, Country Size and Economic Volatility: The Compensation Hypothesis Revisited," Business and Politics, De Gruyter, vol. 9(2), pages 1-22, September.
    55. Frederick Solt, 2016. "The Standardized World Income Inequality Database," Social Science Quarterly, Southwestern Social Science Association, vol. 97(5), pages 1267-1281, November.
    56. Bergh, Andreas & Bjørnskov, Christian, 2014. "Trust, welfare states and income equality: Sorting out the causality," European Journal of Political Economy, Elsevier, vol. 35(C), pages 183-199.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Andreas Bergh & Anders Kärnä, 2021. "Globalization and populism in Europe," Public Choice, Springer, vol. 189(1), pages 51-70, October.
    2. Florian Dorn & Clemens Fuest & Niklas Potrafke, 2022. "Trade openness and income inequality: New empirical evidence," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 202-223, January.
    3. Björn Kauder & Manuela Krause & Niklas Potrafke, 2021. "Do Left-wing Governments Decrease Wage Inequality among Civil Servants? Empirical Evidence from the German States," Public Finance Review, , vol. 49(1), pages 106-135, January.
    4. Rasmus Wiese & João Tovar Jalles & Jakob de Haan, 2024. "Structural reforms and income distribution: new evidence for OECD countries," Oxford Economic Papers, Oxford University Press, vol. 76(4), pages 1071-1088.
    5. Hiroyuki Takeshima, 2024. "Public Expenditure’s Role in Reducing Poverty and Improving Food and Nutrition Security: Cross-Country Evidence from SPEED Data," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 36(5), pages 1045-1073, October.
    6. Atta Ullah & Zhao Kui & Saif Ullah & Chen Pinglu & Saba Khan, 2021. "Sustainable Utilization of Financial and Institutional Resources in Reducing Income Inequality and Poverty," Sustainability, MDPI, vol. 13(3), pages 1-25, January.
    7. Florian Haelg & Niklas Potrafke & Jan-Egbert Sturm, 2022. "The determinants of social expenditures in OECD countries," Public Choice, Springer, vol. 193(3), pages 233-261, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bergh, Andreas & Nilsson, Therese, 2010. "Do liberalization and globalization increase income inequality?," European Journal of Political Economy, Elsevier, vol. 26(4), pages 488-505, December.
    2. Klaus Gründler & Niklas Potrafke & Timo Wochner, 2020. "Structural Reforms and Income Inequality: Who Benefits From Market-Oriented Reforms?," EconPol Policy Reports 18, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    3. Valentin F. Lang & Ms. Marina Mendes Tavares, 2018. "The Distribution of Gains from Globalization," IMF Working Papers 2018/054, International Monetary Fund.
    4. Gründler, Klaus & Köllner, Sebastian, 2017. "Determinants of governmental redistribution: Income distribution, development levels, and the role of perceptions," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 930-962.
    5. Niklas Potrafke, 2019. "The globalisation–welfare state nexus: Evidence from Asia," The World Economy, Wiley Blackwell, vol. 42(3), pages 959-974, March.
    6. Kotschy, Rainer & Sunde, Uwe, 2017. "Democracy, inequality, and institutional quality," European Economic Review, Elsevier, vol. 91(C), pages 209-228.
    7. Gründler, Klaus & Scheuermeyer, Philipp, 2018. "Growth effects of inequality and redistribution: What are the transmission channels?," Journal of Macroeconomics, Elsevier, vol. 55(C), pages 293-313.
    8. Potrafke, Niklas, 2013. "Globalization and labor market institutions: International empirical evidence," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 829-842.
    9. Florian Haelg & Niklas Potrafke & Jan-Egbert Sturm, 2022. "The determinants of social expenditures in OECD countries," Public Choice, Springer, vol. 193(3), pages 233-261, December.
    10. Andreas Bergh & Anders Kärnä, 2021. "Globalization and populism in Europe," Public Choice, Springer, vol. 189(1), pages 51-70, October.
    11. Gründler, Klaus & Scheuermeyer, Philipp, 2015. "Income inequality, economic growth, and the effect of redistribution," W.E.P. - Würzburg Economic Papers 95, University of Würzburg, Department of Economics.
    12. Islam, Md. Rabiul, 2018. "Wealth inequality, democracy and economic freedom," Journal of Comparative Economics, Elsevier, vol. 46(4), pages 920-935.
    13. Erauskin, Iñaki & Turnovsky, Stephen J., 2022. "International financial integration, the level of development, and income inequality: Some empirical evidence," International Review of Economics & Finance, Elsevier, vol. 82(C), pages 48-64.
    14. Gründler, Klaus & Krieger, Tommy, 2016. "Democracy and growth: Evidence from a machine learning indicator," European Journal of Political Economy, Elsevier, vol. 45(S), pages 85-107.
    15. Florian Dorn & Christoph Schinke, 2018. "Top income shares in OECD countries: The role of government ideology and globalisation," The World Economy, Wiley Blackwell, vol. 41(9), pages 2491-2527, September.
    16. Pleninger, Regina & Sturm, Jan-Egbert, 2020. "The effects of economic globalisation and ethnic fractionalisation on redistribution," World Development, Elsevier, vol. 130(C).
    17. Rojas-Vallejos, Jorge & Lastuka, Amy, 2020. "The income inequality and carbon emissions trade-off revisited," Energy Policy, Elsevier, vol. 139(C).
    18. Gründler, Klaus, 2015. "The vanishing effect of finance on growth," Discussion Paper Series 133, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    19. Jianchun Fang & Giray Gozgor & James H. Nolt, 2022. "Globalisation, economic uncertainty and labour market regulations: Implications for the COVID‐19 crisis," The World Economy, Wiley Blackwell, vol. 45(7), pages 2165-2187, July.
    20. Krieger, Tim & Meierrieks, Daniel, 2016. "Political capitalism: The interaction between income inequality, economic freedom and democracy," European Journal of Political Economy, Elsevier, vol. 45(C), pages 115-132.

    More about this item

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:ecopol:v:32:y:2020:i:1:p:104-142. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0954-1985 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.