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Rising Income Inequality: Technology, or Trade and Financial Globalization?

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Author Info
Chris Papageorgiou
Subir Lall
Florence Jaumotte

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Abstract

We examine the relationship between trade and financial globalization and the rise in inequality in most countries in recent decades. We find technological progress as having a greater impact than globalization on inequality. The limited overall impact of globalization reflects two offsetting tendencies: whereas trade globalization is associated with a reduction in inequality, financial globalization-and foreign direct investment in particular-is associated with an increase. A key finding is that both globalization and technological changes increase the returns on human capital, underscoring the importance of education and training in both developed and developing countries in addressing rising inequality.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/185.

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Length: 36 pages
Date of creation: 24 Jul 2008
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Handle: RePEc:imf:imfwpa:08/185

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Keywords: Income distribution ; Globalization ; Foreign direct investment ; Human capital ; Education ; Economic models ; Trade models ;

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Nilanjan Banik, 2009. "Trade and Social Development: The case of Asia," Working Papers 6809, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada.. [Downloadable!]
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