IDEAS home Printed from https://ideas.repec.org/a/oup/wbecrv/v19y2005i1p21-44.html
   My bibliography  Save this article

Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys

Author

Listed:
  • Branko Milanovic

Abstract

New data derived directly from household surveys are used to examine the effects of globalization on income distribution in poor and rich countries. The article looks at the impact of openness (proxied by the ratio of trade to gdp) and of direct foreign investment on relative income shares across the entire income distribution. It finds strong evidence that at low average income levels, the income share of the poor is smaller in countries that are more open to trade. As national income levels rise, the incomes of the poor and the middle class rise relative to the income of the rich. The article explains why using the trade to gdp ratio in purchasing power parity terms, as favored by some analysts, is inappropriate in studies of the effect of trade on income distribution. Copyright 2005, Oxford University Press.

Suggested Citation

  • Branko Milanovic, 2005. "Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys," The World Bank Economic Review, World Bank, vol. 19(1), pages 21-44.
    • Handle: RePEc:oup:wbecrv:v:19:y:2005:i:1:p:21-44
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Kevin M. Murphy & Finis Welch, 1992. "The Structure of Wages," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 107(1), pages 285-326.
    2. Christopher F Baum & Mark E. Schaffer & Steven Stillman, 2003. "Instrumental variables and GMM: Estimation and testing," Stata Journal, StataCorp LLC, vol. 3(1), pages 1-31, March.
    3. Benarroch, Michael & Gaisford, James, 1997. "Economies of Scale, International Capital Mobility, and North-South Inequality," Review of International Economics, Wiley Blackwell, vol. 5(3), pages 412-428, August.
    4. Lucas, Robert E, Jr, 1990. "Why Doesn't Capital Flow from Rich to Poor Countries?," American Economic Review, American Economic Association, vol. 80(2), pages 92-96, May.
    5. Adrian Wood, 1997. "How Trade Hurt Unskilled Workers," Palgrave Macmillan Books, in: Jitendralal Borkakoti & Chris Milner (ed.), International Trade and Labour Markets, chapter 7, pages 140-168, Palgrave Macmillan.
    6. Williamson, Jeffrey G, 1997. "Globalization and Inequality, Past and Present," The World Bank Research Observer, World Bank, vol. 12(2), pages 117-135, August.
    7. Birdsall, Nancy & Londono, Juan Luis, 1997. "Asset Inequality Matters: An Assessment of the World Bank's Approach to Poverty Reduction," American Economic Review, American Economic Association, vol. 87(2), pages 32-37, May.
    8. Kanbur, Ravi, 2000. "Income distribution and development," Handbook of Income Distribution, in: A.B. Atkinson & F. Bourguignon (ed.), Handbook of Income Distribution, edition 1, volume 1, chapter 13, pages 791-841, Elsevier.
    9. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
    10. Beck, Thorsten & Clarke, George & Groff, Alberto & Keefer, Philip & Walsh, Patrick, 2000. "New tools and new tests in comparative political economy - the database of political institutions," Policy Research Working Paper Series 2283, The World Bank.
    11. Beyer, Harald & Rojas, Patricio & Vergara, Rodrigo, 1999. "Trade liberalization and wage inequality," Journal of Development Economics, Elsevier, vol. 59(1), pages 103-123, June.
    12. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
    13. Wood, Adrian, 1995. "North-South Trade, Employment and Inequality: Changing Fortunes in a Skill-Driven World," OUP Catalogue, Oxford University Press, number 9780198290155, Decembrie.
    14. George J. Borjas, 1994. "The Economics of Immigration," Journal of Economic Literature, American Economic Association, vol. 32(4), pages 1667-1717, December.
    15. Mr. Phillip L Swagel & Mr. Matthew J. Slaughter, 1997. "The Effect of Globalization on Wages in the Advanced Economies," IMF Working Papers 1997/043, International Monetary Fund.
    16. Mark Gradstein & Branko Milanovic & Yvonne Ying, 2001. "Democracy and Income In-Equality: An Empirical Analysis," CESifo Working Paper Series 411, CESifo.
    17. Wood Júnior, Thomaz, 1995. "Workers," RAE - Revista de Administração de Empresas, FGV-EAESP Escola de Administração de Empresas de São Paulo (Brazil), vol. 35(2), March.
    18. Xavier Sala-i-Martin, 2001. "The disturbing 'rise' of global income inequality," Economics Working Papers 616, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2002.
    19. Edward Anderson & Paul J. G. Tang & Adrian Wood, 2006. "Globalization, co-operation costs, and wage inequalities," Oxford Economic Papers, Oxford University Press, vol. 58(4), pages 569-595, October.
    20. Mr. N. F. R. Crafts, 2000. "Globalization and Growth in the Twentieth Century," IMF Working Papers 2000/044, International Monetary Fund.
    21. Peter K. Schott, 1999. "One Size Fits All? Specialization, Trade and Income Inequality," Yale School of Management Working Papers ysm132, Yale School of Management.
    22. Richard Baldwin & Philippe Martin, 1999. "Two Waves of Globalisation: Superficial Similarities, Fundamental Differences," Post-Print hal-03417560, HAL.
    23. Shahid Yusuf, 2003. "Globalisation and the Challenge for Developing Countries," Journal of African Economies, Centre for the Study of African Economies, vol. 12(Supplemen), pages 35-72, February.
    24. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.
    25. Gundlach, Erich & Nunnenkamp, Peter, 1996. "Some consequences of globalization for developing countries," Kiel Working Papers 753, Kiel Institute for the World Economy (IfW Kiel).
    26. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
    27. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    28. Jacques Drèze (ed.), 2001. "Advances in Macroeconomic Theory," International Economic Association Series, Palgrave Macmillan, number 978-0-333-99275-3, November.
    29. William Easterly & Roumeen Islam & Joseph E. Stiglitz, 2001. "Volatility and Macroeconomic Paradigms for Rich and Poor," International Economic Association Series, in: Jacques Drèze (ed.), Advances in Macroeconomic Theory, chapter 17, pages 352-372, Palgrave Macmillan.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. Branko Milanovic & Lyn Squire, 2007. "Does Tariff Liberalization Increase Wage Inequality? Some Empirical Evidence," NBER Chapters, in: Globalization and Poverty, pages 143-182, National Bureau of Economic Research, Inc.
    3. Patrick Artus, 2006. "Intégration commerciale avec des pays émergents ayant des ressources importantes en main-d'œuvre qualifiée. Quels effets pour les pays européens ?," Revue économique, Presses de Sciences-Po, vol. 57(4), pages 673-704.
    4. Grabiella Berloffa & Maria Luigia Segnana, 2004. "Trade, inequality and pro-poor growth: Two perspectives, one message?," Department of Economics Working Papers 0408, Department of Economics, University of Trento, Italia.
    5. Kevin H. O'Rourke, 2002. "Globalization and Inequality: Historical Trends," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 57(01), pages 65-104, March.
    6. Thierry Verdier, 2005. "Intégration commerciale « socialement responsable » : une approche en termes d'économie politique," Revue d’économie du développement, De Boeck Université, vol. 13(4), pages 55-121.
    7. Baldwin, John R. & Raffiquzzaman, Mohammed, 1998. "The Effect of Technology and Trade on Wage Differentials Between Nonproduction and Production Workers in Canadian Manufacturing," Analytical Studies Branch Research Paper Series 1998098e, Statistics Canada, Analytical Studies Branch.
    8. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
    9. Joseph Deutsch & Jacques Silber, 2007. "Earnings Functions and the Measurement of the Determinants of Wage Dispersion: Extending Oaxaca’s Approach," Economics Working Paper Archive wp_521, Levy Economics Institute.
    10. Afonso, Oscar, 2013. "Diffusion and directed technological knowledge, human capital and wages," Economic Modelling, Elsevier, vol. 31(C), pages 370-382.
    11. Jorge Saba Arbache, 2001. "Trade Liberalisation and Labor Markets in Developing Countries: Theory and Evidence," Studies in Economics 0112, School of Economics, University of Kent.
    12. Jeff Borland, 2000. "Economic Explanations of Earnings Distribution Trends in the International Literature and Application to New Zealand," Treasury Working Paper Series 00/16, New Zealand Treasury.
    13. Matthew Higgins & Jeffrey G. Williamson, 1999. "Explaining Inequality the World Round: Cohort Size, Kuznets Curves, andOpenness," NBER Working Papers 7224, National Bureau of Economic Research, Inc.
    14. Yoshimichi Murakami, 2013. "Trade Liberalization and Skill Premium in Chile," Discussion Paper Series DP2013-19, Research Institute for Economics & Business Administration, Kobe University.
    15. Székely, Miguel & Birdsall, Nancy & Behrman, Jere R., 2000. "Economics Reform and Wage Differentials in Latin America," IDB Publications (Working Papers) 1332, Inter-American Development Bank.
    16. Haskel, Jonathan & Slaughter, Matthew J, 2001. "Trade, Technology and U.K. Wage Inequality," Economic Journal, Royal Economic Society, vol. 111(468), pages 163-187, January.
    17. Fajnzylber, Pablo & Maloney, William F., 2005. "Labor demand and trade reform in Latin America," Journal of International Economics, Elsevier, vol. 66(2), pages 423-446, July.
    18. David Kucera, 2001. "Foreign Trade of Manufactures and Men and Women's Employment and Earnings in Germany and Japan," International Review of Applied Economics, Taylor & Francis Journals, vol. 15(2), pages 129-149.
    19. Ashley S. Timmer & Jeffrey G. Williamson, 1996. "Racism, Xenophobia or Markets? The Political Economy of Immigration Policy Prior to the Thirties," NBER Working Papers 5867, National Bureau of Economic Research, Inc.
    20. Martin Baur, 2010. "Politics and Income Distribution," Chapters, in: Neri Salvadori (ed.), Institutional and Social Dynamics of Growth and Distribution, chapter 3, Edward Elgar Publishing.

    More about this item

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • F15 - International Economics - - Trade - - - Economic Integration
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty

    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:oup:wbecrv:v:19:y:2005:i:1:p:21-44. 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: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/wrldbus.html .

    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.