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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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    References listed on IDEAS

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    Cited by:

    1. 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.
    2. 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.
    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. Niklas Potrafke, 2019. "The globalisation–welfare state nexus: Evidence from Asia," The World Economy, Wiley Blackwell, vol. 42(3), pages 959-974, March.
    5. Thakor, Anjan V., 2020. "Fintech and banking: What do we know?," Journal of Financial Intermediation, Elsevier, vol. 41(C).
    6. Shehabi, Manal, 2020. "Diversification effects of energy subsidy reform in oil exporters: Illustrations from Kuwait," Energy Policy, Elsevier, vol. 138(C).
    7. Li, Xiang & Su, Dan, 2020. "Capital account liberalisation does worsen income inequality," IWH Discussion Papers 7/2020, Halle Institute for Economic Research (IWH).
    8. Niklas Potrafke, 2019. "The globalisation–welfare state nexus: Evidence from Asia," The World Economy, Wiley Blackwell, vol. 42(3), pages 959-974, March.
    9. Valentin F. Lang & Marina Mendes Tavares, 2018. "The Distribution of Gains from Globalization," IMF Working Papers 18/54, International Monetary Fund.
    10. Markus Brueckner & Ngo Van Long & Joaquin Vespignani, 2020. "Trade, Education, and Income Inequality," CIRANO Working Papers 2020s-33, CIRANO.
    11. Li, Mengyu & Lenzen, Manfred & Wang, Dai & Nansai, Keisuke, 2020. "GIS-based modelling of electric-vehicle–grid integration in a 100% renewable electricity grid," Applied Energy, Elsevier, vol. 262(C).
    12. Bonalumi, D. & Lasala, S. & Macchi, E., 2020. "CO2-TiCl4 working fluid for high-temperature heat source power cycles and solar application," Renewable Energy, Elsevier, vol. 147(P3), pages 2842-2854.
    13. Manuela Magalhães & Tiago Sequeira & Óscar Afonso, 2019. "Industry Concentration and Wage Inequality: a Directed Technical Change Approach," Open Economies Review, Springer, vol. 30(3), pages 457-481, July.

    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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