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Globalization and Income Inequality Revisited

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  • Florian Dorn
  • Clemens Fuest

    ()

  • Niklas Potrafke

    ()

Abstract

This paper re-examines the link between globalization and income inequality. We use data for 140 countries over the period 1970-2014 and employ an IV approach to deal with the endogeneity of globalization measures. We find that the link between globalization and income inequality differs across different groups of countries. There is a robust positive relationship between globalization and inequality in the transition countries including China and most countries of Middle and Eastern Europe. In the sample of the most advanced economies, neither OLS nor 2SLS results show any significant positive relationship between globalization and inequality. We conclude that institutions providing income insurance and education, which characterize most advanced economies but are less developed in transition economies, may have moderated effects of globalization on income inequality.

Suggested Citation

  • Florian Dorn & Clemens Fuest & Niklas Potrafke, 2018. "Globalization and Income Inequality Revisited," CESifo Working Paper Series 6859, CESifo.
  • Handle: RePEc:ces:ceswps:_6859
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    Cited by:

    1. 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.
    2. Bergh, Andreas & Kärnä, Anders, 2019. "Globalization and Populism in Europe," Working Paper Series 1304, Research Institute of Industrial Economics, revised 06 Oct 2020.
    3. Philipp Harms & Jakob Schwab, 2019. "Depression of the deprived or eroding enthusiasm of the elites: What has shifted the support for globalization?," Working Papers 1912, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    4. Haufler, Andreas & Perroni, Carlo, 2020. "Incentives, Globalization, and Redistribution," The Warwick Economics Research Paper Series (TWERPS) 1282, University of Warwick, Department of Economics.
    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. Li, Xiang & Su, Dan, 2020. "Capital account liberalisation does worsen income inequality," IWH Discussion Papers 7/2020, Halle Institute for Economic Research (IWH).
    7. Markus Brueckner & Ngo Van Long & Joaquin L. Vespignani, 2020. "Non-Gravity Trade," Globalization Institute Working Papers 388, Federal Reserve Bank of Dallas, revised 29 May 2020.
    8. Valentin F. Lang & Marina Mendes Tavares, 2018. "The Distribution of Gains from Globalization," IMF Working Papers 18/54, International Monetary Fund.
    9. Markus Brueckner & Ngo Van Long & Joaquin Vespignani, 2020. "Trade, Education, and Income Inequality," CIRANO Working Papers 2020s-33, CIRANO.
    10. Harms, Philipp & Schwab, Jakob, 2020. "Depression of the deprived or eroding enthusiasm of the elites: What has shifted the support for international trade?," European Journal of Political Economy, Elsevier, vol. 64(C).

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    More about this item

    Keywords

    globalization; income inequality; redistribution; instrumental variable estimation; panel econometrics; development levels; transition economies; China;

    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F60 - International Economics - - Economic Impacts of Globalization - - - General
    • C26 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Instrumental Variables (IV) Estimation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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