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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," ifo Working Paper Series 247, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
  • Handle: RePEc:ces:ifowps:_247
    as

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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 Globalization," ifo Working Paper Series 246, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.

    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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