Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys
By Branko Milanovic. 2005
205 citations recorded by the source corpus.
The effects of globalization on income di stribution within rich and poor countries are a matter of controversy. While international trade theory in its most abstract formulation implies that increased trad e and foreign investment should make income distribution more equal in poor c ountries and less equal in rich countries, finding these effects has proved elusive. The paper presents another attempt to discern the effects of globalization by us ing the new data derived directly from household surveys. The paper looks at the impact of openness (trade/GDP ratio) and direct foreign investment on relative income shares across the entire income distribution. In contrast to what one w ould expect from theory, we find strong evidence that at low average income level, it is the rich who benefit from openness. As income level rises, that is around the income level of $5-7,000 per capita at international prices, the situation changes and it is the relative income of the poor and the middle class that rises compared to the rich. It seems that openness makes income distribution worse before making it better—or differently that the effect of openness on income di stribution depends on country’s average income level.
Subfields: Sociology and Political Science
View Paper: https://www.semanticscholar.org/paper/9c73a715b289da642d637d7cf7ab531277dbce2f
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In Sociology and Political Science
Citations in the corpus
- Does economic globalisation affect income inequality? A meta‐analysis (2020, background): “…of the original Stolper-Samuelson theorem have provided important guidance for setting up hypothesis tests in large parts of the econometric globalisation-inequality literature for advanced and developing countries (e.g. Milanovic 2005; Goldberg and Pavncik 2007; Bigsten and Munshi 2014).”
- Openness, inequality and poverty: Endowments matter (2006, unknown): “List of countries included in the sample 1988–1998 (deciles from Milanovic 2005a).”
- Looking Beyond Averages in the Trade and Poverty Debate (2004, unknown): “2 volume is inequality increasing in poor countries but that the reverse holds at higher mean income (Ravallion 2001; Milanovic 2004).”
- When is Growth Pro-Poor? Cross-Country Evidence (2004, unknown): “For example, a number of papers have found that increased openness increases summary measures of inequality, at least in low-income countries (Barro (2000), Lundberg and Squire (2003), Milanovic (2003)).”