Abstract
This paper empirically investigates the relative effectiveness of economic globalization, trade openness, and financial openness on income inequality in low-, middle-, and high-income countries for the panel data over the period from 1991 to 2020 by endogenizing economic growth, urbanization, agriculture, industry, and service sectors’ value-added as % of GDP as control variables in income inequality function. The results emanating from the panel pooled mean group-autoregressive distributed lag (PMG-ARDL) test provide evidence of a significant long-run relationship among the variables. Interestingly, economic globalization reduces income inequality for high- and middle-income countries and increases it in low-income countries. On the other hand, trade openness reduces income inequality in high- and middle-income countries but increases it for low-income countries. In contrast, financial openness lessens income inequality in low-income countries but increases it for middle- and high-income countries. We find that urbanization increases income inequality in low-, middle- and high-income countries. We also find that economic growth decreases (increases) income inequality in high (middle and low)-income countries. Moreover, it is found that industrial and service sectors’ output decrease (increases) income inequality in high (middle and low)-income countries, whereas agricultural output improves (deteriorates) income distribution in middle- and low- (high) income countries. In light of these findings, we suggest that the governments of low-income countries need to focus more on improving the level of globalization and trade openness to improve their economic conditions in long run. Both high- and middle-income countries should also improve their financial openness so that effective utilization of overseas finance will flourish their overall economy.
Villanthenkodath, Muhammed Ashiq, Shreya Pal, and Mantu Kumar Mahalik. “Income inequality in globalization context: Evidence from global data.” Journal of the Knowledge Economy 15.1 (2024): 3872-3902.