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Impact of Economic Globalization on Income Inequality: Developed Economies vs Emerging Economies

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  • Baek Inmee

    () (Department of Economics, Suffolk University, 8 Ashburton Place, Boston, MA 02108, USA)

  • Shi Qichao

    () (Department of Economics, Lehigh University, 621 Taylor Street, Bethlehem, PA 18015, USA)

Abstract

This paper studies income inequality and globalization by decomposing economic globalization into trade intensity and financial integration, and also by differentiating the effect of globalization across developed and developing countries. Using panel data on 26 developed countries and 52 developing countries for the 1990–2010 period when globalization was accelerated, this study finds that financial integration affects the income inequality differently from trade intensity and the effect is in contrast across two groups of countries. For example, an increase in trade intensity would widen income inequality in developed countries, but it would reduce the inequality in developing countries. And, a deepening of the financial integration would reduce the income inequality in developed countries but increase the inequality in developing countries. These results suggest that income inequality of developing countries would deteriorate with an imprudent dependence on foreign financing or a rapid opening up of their financial markets to foreign investors, or when faced with more barriers on free international trade.

Suggested Citation

  • Baek Inmee & Shi Qichao, 2016. "Impact of Economic Globalization on Income Inequality: Developed Economies vs Emerging Economies," Global Economy Journal, De Gruyter, vol. 16(1), pages 49-61, March.
  • Handle: RePEc:bpj:glecon:v:16:y:2016:i:1:p:49-61:n:8
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    References listed on IDEAS

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    1. Archana Pillai, 2011. "Impact of Political Regime and Economic Openness on Income Inequality: A Tale of Low-Income and OECD Countries," The IUP Journal of Financial Economics, IUP Publications, vol. 0(4), pages 60-75, December.
    2. Leopoldo Nascia & Mario Pianta, 2009. "Forces of inequality? The impact of technology and globalisation," Intereconomics: Review of European Economic Policy, Springer;German National Library of Economics;Centre for European Policy Studies (CEPS), vol. 44(6), pages 332-336, November.
    3. Miller, Tracy C., 2001. "Impact of globalization on U.S. wage inequality: Implications for policy," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 219-242, November.
    4. Han, Jun & Liu, Runjuan & Zhang, Junsen, 2012. "Globalization and wage inequality: Evidence from urban China," Journal of International Economics, Elsevier, vol. 87(2), pages 288-297.
    5. Claessens, Stijn & Perotti, Enrico, 2007. "Finance and inequality: Channels and evidence," Journal of Comparative Economics, Elsevier, vol. 35(4), pages 748-773, December.
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