How Does Globalization Affect Income Inequality? A Panel Data Analysis

Sadullah Çelik () and Ulkem Basdas

International Advances in Economic Research, 2010, vol. 16, issue 4, 358-370

Abstract: One of the major issues on the state of income inequality is the effect of globalization through foreign direct investment (FDI). It is well known that FDI inflows create employment opportunities for unskilled labor intensive countries. Hence, during recessionary (expansionary) periods, FDI outflows should cause an increase in a developing (developed) country’s unemployment rate, worsening income inequality. This study differs from the previous literature by employing the key variables FDI, trade volume, and GINI coefficient for a panel of three groups of countries (developed, developing, and miracle countries). We estimated panel cointegration coefficients via FM-OLS. Our results show that the effects of trade liberalization and FDI on income distribution differ for different country groups. Copyright International Atlantic Economic Society 2010

Keywords: FDI; Income inequality; Globalization; Trade volume; Panel cointegration; C10; F01; F15; J30 (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1007/s11294-010-9281-0

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