Friday, April 8, 2011

Impact of Globalization on Income Distribution Inequality in 60 Countries

by Lei Zhou, Basudeb Biswas, Tyler Bowles and Peter J. Saunders

Global Economy Journal
Vol. 11 (2011)

This paper investigates the impact of globalization on income inequality distribution in 60 developed, transitional, and developing countries. Using Kearney's (2002, 2003 and 2004) data and principal component analysis (PCA), two globalization indices are created. One of these indices is the equally weighted index. The other index is derived from the principal component analysis. The Gini coefficient of a country is regressed on each index, respectively, in all 60 test cases.

The main contribution of this paper is its finding of a negative relationship between both globalization indices and the Gini coefficient for all 60 countries under investigation. Furthermore, test results indicate that this relationship is robust. Therefore, the empirical evidence presented in this paper supports the claim that globalization helps reduce income distribution inequality within countries.


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