Does globalization affect top income inequality?

Rene Cabral (), Rocío García-Díaz and Andre Mollick ()

Journal of Policy Modeling, 2016, vol. 38, issue 5, 916-940

Abstract: We reexamine in this paper the role of globalization on top income shares (five classes from top 0.1% to top 10% of the income distribution) for a sample of 15 economies over the period 1970–2004. We investigate financial globalization measures that complement trade openness. Our system GMM (SGMM) estimations allow for a robust treatment of the endogeneity between income concentration and GDP per capita (as well as with taxation or government size). We find two interesting new results. First, the financial integration measure based on portfolio equity and FDI stocks (GEQ) turns out to have a large impact on top income shares, suggesting that the channel through which globalization affects income concentration is through FDI/equity flows. Second, we find strong support for the progressivity of taxation: there is an almost one to one negative effect of higher tax on top income (top 0.1%), which declines monotonically until the top 10% class.

Keywords: Capital inflows; Dynamic panels; Globalization; Income inequality (search for similar items in EconPapers)
JEL-codes: F31 F32 F33 F34 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32)

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Working Paper: Does globalization affect top income inequality? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jpolmo:v:38:y:2016:i:5:p:916-940

DOI: 10.1016/j.jpolmod.2016.05.001

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