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The Relationship between Globalization, Economic Growth and Income Inequality

  • Almas Heshmati

    ()

  • Sangchoon Lee

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

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.

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File URL: ftp://147.46.237.98/DP-51.pdf
File Function: First version, 2010
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Paper provided by Seoul National University; Technology Management, Economics, and Policy Program (TEMEP) in its series TEMEP Discussion Papers with number 201051.

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Length: 39 pages
Date of creation: Jan 2010
Date of revision: Jan 2010
Handle: RePEc:snv:dp2009:201051
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  1. Peter H. Lindert & Jeffrey G. Williamson, 2001. "Does Globalization Make the World More Unequal?," NBER Working Papers 8228, National Bureau of Economic Research, Inc.
  2. 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, March.
  3. Collier, Paul & Dollar, David, 2000. "Can the world cut poverty in half ? how policy reform and effective aid can meet international development goals," Policy Research Working Paper Series 2403, The World Bank.
  4. 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.
  5. Ann Harrison, 2007. "Globalization and Poverty," NBER Books, National Bureau of Economic Research, Inc, number harr06-1, October.
  6. Manasse, Paolo & Turrini, Alessandro, 2001. "Trade, wages, and 'superstars'," Journal of International Economics, Elsevier, vol. 54(1), pages 97-117, June.
  7. Heshmati, Almas, 2004. "The World Distribution of Income and Income Inequality," IZA Discussion Papers 1267, Institute for the Study of Labor (IZA).
  8. Jörg MAYER, 2000. "Globalization, Technology Tranfer And Skill Accumulation In Low-Income Countries," UNCTAD Discussion Papers 150, United Nations Conference on Trade and Development.
  9. Heshmati Almas, 2006. "Measurement of a Multidimensional Index of Globalization," Global Economy Journal, De Gruyter, vol. 6(2), pages 1-30, May.
  10. 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.
  11. Heshmati, Almas, 2004. "The Relationship between Income Inequality, Poverty and Globalisation," IZA Discussion Papers 1277, Institute for the Study of Labor (IZA).
  12. Andersen, Torben M. & Herbertsson, Tryggvi Thor, 2003. "Measuring Globalization," IZA Discussion Papers 817, Institute for the Study of Labor (IZA).
  13. Mayer, Jorg, 2001. "Globalization, Technology Transfer, and Skill Accumulation in Low-Income Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
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