Temporal effects of financial globalization on income inequality

Haris Khan, Choudhry Tanveer Shehzad and Ferhana Ahmad

International Review of Economics & Finance, 2021, vol. 74, issue C, 452-467

Abstract: Through parametric accelerated failure-time survival analysis on a panel of 117 countries for 1970–2018, the study finds robust and generalizable empirical evidence that TTUII (Total Time to Upsurge in Income Inequality) declines after a country allows capital flow across borders. This arguably occurs via the channel of wage inequality, and one or more channels of patrimonial capitalism, labor replacement with capital and market concentration which are transmitted through foreign direct investment. This occurs with a nonmonotonic, unimodal hazard rate of income inequality upsurge which keeps rising for around first three decades of financial globalization exposure before starting to taper off. This implies the need for utilizing FDI as a source of distributional spending targeted towards the low-skilled part of the labor force and the structurally unemployed for the first three decades of an exposure to financial globalization, as well as implementing robust antitrust laws before opening capital markets to the world.

Keywords: Financial globalization; Income distribution; Survival analysis (search for similar items in EconPapers)
JEL-codes: D31 E44 F02 G15 G18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:74:y:2021:i:c:p:452-467

DOI: 10.1016/j.iref.2021.03.012

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