IDEAS home Printed from https://ideas.repec.org/p/ise/isegwp/wp122011.html
   My bibliography  Save this paper

The Effects of Globalisation on OECD Income Inequality: A static and dynamic analysis

Author

Listed:
  • Horácio C. Faustino
  • Carim Vali

Abstract

Using the World Income Inequality Database and a static and dynamic panel data analysis, this paper analyses the correlation between income inequality in the OECD countries and economic globalization, measured by trade openness and foreign direct investment, for the period 1995-2007. The static analysis, conducted by means of the fixed-effects estimator, suggests that trade openness reduces inequality, whereas FDI is positively linked to inequality. Some control variables, such as unemployment and inflation, also have a positive effect on inequality. When we control for endogeneity, using the system GMM estimator with the Windmeijer correction for small samples, the results also show that trade openness decreases income inequality and that the FDI effect on inequality is not significant. The country’s economic growth causes inequality to increase, according to the findings of both our static and dynamic analyses.

Suggested Citation

  • Horácio C. Faustino & Carim Vali, 2011. "The Effects of Globalisation on OECD Income Inequality: A static and dynamic analysis," Working Papers Department of Economics 2011/12, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
  • Handle: RePEc:ise:isegwp:wp122011
    as

    Download full text from publisher

    File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp122011.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
    2. Andreas Bergh & Günther Fink, 2008. "Higher Education Policy, Enrollment, and Income Inequality," Social Science Quarterly, Southwestern Social Science Association, vol. 89(1), pages 217-235.
    3. Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
    4. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 321-340.
    5. Bergh, Andreas & Nilsson, Therese, 2010. "Do liberalization and globalization increase income inequality?," European Journal of Political Economy, Elsevier, vol. 26(4), pages 488-505, December.
    6. Barro, Robert J, 2000. "Inequality and Growth in a Panel of Countries," Journal of Economic Growth, Springer, vol. 5(1), pages 5-32, March.
    7. Bourguignon, F. & Morrisson, C., 1990. "Income distribution, development and foreign trade : A cross-sectional analysis," European Economic Review, Elsevier, vol. 34(6), pages 1113-1132, September.
    8. Axel Dreher & Noel Gaston, 2008. "Has Globalization Increased Inequality?," Review of International Economics, Wiley Blackwell, vol. 16(3), pages 516-536, August.
    9. Cornia, G.A., 1999. "Liberalization, Globalization and Income Distribution," Research Paper 157, World Institute for Development Economics Research.
    10. Calderon, Cesar & Chong, Alberto, 2001. "External sector and income inequality in interdependent economies using a dynamic panel data approach," Economics Letters, Elsevier, vol. 71(2), pages 225-231, May.
    11. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, pages 371-393.
    12. Edwards, Sebastian, 1997. "Trade Policy, Growth, and Income Distribution," American Economic Review, American Economic Association, vol. 87(2), pages 205-210, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. repec:jns:jbstat:v:237:y:2017:i:3:p:225-273:n:5 is not listed on IDEAS
    2. Stossberg Sibylle & Blöchliger Hansjörg, 2017. "Fiscal Decentralisation and Income Inequality: Empirical Evidence from OECD Countries," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 237(3), pages 225-273, June.
    3. Adeel Ali & Syed Faizan Iftikhar & Ambreen Fatima & Lubna Naz, 2015. "Income Inequality, Redistribution of Income and Trade Openness," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 54(4), pages 865-874.

    More about this item

    Keywords

    Globalisation; Income inequality; Panel data. Classification-C23; D30; D63; F02.;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:ise:isegwp:wp122011. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Vitor Escaria). General contact details of provider: https://aquila1.iseg.ulisboa.pt/aquila/departamentos/EC .

    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 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.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.