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The Relationship between Globalization, Economic Growth and Income Inequality

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  • Almas Heshmati

    ()

  • Sangchoon Lee

    (Technology Management, Economics, and Policy Program (TEMEP), Seoul National University)

Abstract

This study investigates the relationship between globalization and income inequality by developing a new globalization index based on economic growth. In addition two other indices of globalization, non-parametric Kearney and parametric principal component analysis are used as benchmarks to compare the results. The proposed new index is decomposed into four sub components. The index is also estimated in several forms separated by different economic growth variables and in decomposed or composite forms. The main feature of this approach is that the estimation of globalization index and the examination of its relationship with economic development are conducted in one step. All indices are compared in respect of their level, development and correlations. The empirical analysis is based on a panel data consisting of 61 developed and developing countries observed during the period 1995-2001. Regression analysis is used to estimate the effects of globalization on income inequality. To examine the sensitivity of the relationship between globalization and inequality, different inequality variables are employed. It is expected that the indices serve as useful tools in comparing the globalization process among countries and the evaluation of the the globalization effect on economic development and income inequality. This study is useful in the construction of a new multidimensional index of globalization with different and estimated weights attached to the determinant factors.

Suggested Citation

  • Almas Heshmati & Sangchoon Lee, 2010. "The Relationship between Globalization, Economic Growth and Income Inequality," TEMEP Discussion Papers 201051, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Jan 2010.
  • Handle: RePEc:snv:dp2009:201051
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    File URL: ftp://147.46.237.98/DP-51.pdf
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    References listed on IDEAS

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    1. Ann Harrison, 2007. "Globalization and Poverty," NBER Books, National Bureau of Economic Research, Inc, number harr06-1, December.
    2. Peter H. Lindert & Jeffrey G. Williamson, 2003. "Does Globalization Make the World More Unequal?," NBER Chapters,in: Globalization in Historical Perspective, pages 227-276 National Bureau of Economic Research, Inc.
    3. Collier, Paul & Dollar, David, 2001. "Can the World Cut Poverty in Half? How Policy Reform and Effective Aid Can Meet International Development Goals," World Development, Elsevier, vol. 29(11), pages 1787-1802, November.
    4. Manasse, Paolo & Turrini, Alessandro, 2001. "Trade, wages, and 'superstars'," Journal of International Economics, Elsevier, vol. 54(1), pages 97-117, June.
    5. Heshmati, Almas, 2004. "The Relationship between Income Inequality, Poverty and Globalisation," IZA Discussion Papers 1277, Institute for the Study of Labor (IZA).
    6. Axel Dreher, 2006. "Does globalization affect growth? Evidence from a new index of globalization," Applied Economics, Taylor & Francis Journals, vol. 38(10), pages 1091-1110.
    7. Heshmati, Almas, 2004. "The World Distribution of Income and Income Inequality," IZA Discussion Papers 1267, Institute for the Study of Labor (IZA).
    8. Mayer, Jorg, 2001. "Globalization, Technology Transfer, and Skill Accumulation in Low-Income Countries," WIDER Working Paper Series 039, World Institute for Development Economic Research (UNU-WIDER).
    9. Andersen, Torben M. & Herbertsson, Tryggvi Thor, 2003. "Measuring Globalization," IZA Discussion Papers 817, Institute for the Study of Labor (IZA).
    10. Thomas W. Hertel & L. Alan Winters, 2006. "Poverty and the WTO : Impacts of the Doha Development Agenda," World Bank Publications, The World Bank, number 7411, October.
    11. Miller, Tracy C., 2001. "Impact of globalization on U.S. wage inequality: Implications for policy," The North American Journal of Economics and Finance, Elsevier, vol. 12(3), pages 219-242, November.
    12. Jörg MAYER, 2000. "Globalization, Technology Tranfer And Skill Accumulation In Low-Income Countries," UNCTAD Discussion Papers 150, United Nations Conference on Trade and Development.
    13. Heshmati Almas, 2006. "Measurement of a Multidimensional Index of Globalization," Global Economy Journal, De Gruyter, vol. 6(2), pages 1-30, May.
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    Cited by:

    1. Bory Seng & Almas Heshmati, 2010. "Digital Divide and its Variations amongst OECD, NIE and ASEAN Countries," TEMEP Discussion Papers 201055, Seoul National University; Technology Management, Economics, and Policy Program (TEMEP), revised Feb 2010.
    2. Yang, Yiwen & Greaney, Theresa M., 2017. "Economic growth and income inequality in the Asia-Pacific region: A comparative study of China, Japan, South Korea, and the United States," Journal of Asian Economics, Elsevier, vol. 48(C), pages 6-22.
    3. repec:voj:journl:v:63:y:2016:i:5:p:581-601 is not listed on IDEAS
    4. repec:voj:journl:v:63:y:2016:i:2:p:231-258 is not listed on IDEAS
    5. Tausch, Arno, 2011. "Globalization as a driver or bottleneck for sustainable development. General tendencies and European implications," MPRA Paper 33227, University Library of Munich, Germany.

    More about this item

    Keywords

    Globalization; income inequality; economic growth; index;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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