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How Does Globalization Affect Income Inequality? A Panel Data Analysis

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  • Sadullah Çelik
  • Ulkem Basdas

Abstract

One of the major issues on the state of income inequality is the effect of globalization through foreign direct investment (FDI). It is well known that FDI inflows create employment opportunities for unskilled labor intensive countries. Hence, during recessionary (expansionary) periods, FDI outflows should cause an increase in a developing (developed) country’s unemployment rate, worsening income inequality. This study differs from the previous literature by employing the key variables FDI, trade volume, and GINI coefficient for a panel of three groups of countries (developed, developing, and miracle countries). We estimated panel cointegration coefficients via FM-OLS. Our results show that the effects of trade liberalization and FDI on income distribution differ for different country groups. Copyright International Atlantic Economic Society 2010

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  • Sadullah Çelik & Ulkem Basdas, 2010. "How Does Globalization Affect Income Inequality? A Panel Data Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 16(4), pages 358-370, November.
    • Handle: RePEc:kap:iaecre:v:16:y:2010:i:4:p:358-370:10.1007/s11294-010-9281-0
    DOI: 10.1007/s11294-010-9281-0
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    More about this item

    Keywords

    FDI; Income inequality; Globalization; Trade volume; Panel cointegration; C10; F01; F15; J30;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • F01 - International Economics - - General - - - Global Outlook
    • F15 - International Economics - - Trade - - - Economic Integration
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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