The Effects of Globalisation on OECD Income Inequality: A static and dynamic analysis

Horácio Faustino () and Carim Vali

No 2011/12, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: Using the World Income Inequality Database and a static and dynamic panel data analysis, this paper analyses the correlation between income inequality in the OECD countries and economic globalization, measured by trade openness and foreign direct investment, for the period 1995-2007. The static analysis, conducted by means of the fixed-effects estimator, suggests that trade openness reduces inequality, whereas FDI is positively linked to inequality. Some control variables, such as unemployment and inflation, also have a positive effect on inequality. When we control for endogeneity, using the system GMM estimator with the Windmeijer correction for small samples, the results also show that trade openness decreases income inequality and that the FDI effect on inequality is not significant. The country’s economic growth causes inequality to increase, according to the findings of both our static and dynamic analyses.

Keywords: Globalisation, Income inequality, Panel data. Classification-C23; D30; D63; F02. (search for similar items in EconPapers)
Date: 2011-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://depeco.iseg.ulisboa.pt/wp/wp122011.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ise:isegwp:wp122011

Access Statistics for this paper

More papers in Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa Department of Economics, ISEG - Lisbon School of Economics and Management, Universidade de Lisboa, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL.
Bibliographic data for series maintained by Vitor Escaria ().