GLOBALIZATION, INCOME INEQUALITY AND INCOME DISTRIBUTION: NEW EVIDENCES FROM DEVELOPED COUNTRIES

The main purpose of this paper is investigating the dynamics of income inequality and globalization with emphasis on laber market inequality in data covering 13 developed countries over the period of 1995-2016. The paper uses Panel cointegration test and Fully Modified Ordinary Least Squares method to determine the long run relationship between Globalization, Inequality in income, FDI and income inequality indices. The results suggest that globalization did increase the inequality of gross wages. In addition, both trade openness and outward foreign direct investments had a positive effect on gross income inequality, but inward FDI did not have an effect. On the other hand, when looking at the effects of globalization on the net income inequality, results differed. An increase in outward and inward FDI will decrease the net income inequality. Technological progress, on the other hand, had only a significant positive effect on the net income inequality. Moreover, results showed that an increase in globalization increases the income redistribution by government.