Economic Globalization and Income Inequality

Abstract

The potential for economic progress has been constrained in recent decades by growing income disparity. Using panel data methodologies and policy simulations, this study examines the impact of economic globalisation on income inequality in both a cross-country and country-specific context. The sample includes post-liberalization developed, developing, and least-developed nations. The findings reveal that globalisation has, generally speaking, reduced inequality in advanced nations while having the reverse impact in low-income ones. Trade and FDI have opposing effects on income distribution; trade makes it worse, but FDI is good for all countries and helps to lessen income inequality. It has been discovered that FDI has a higher effect on lowering income disparity. The policy simulations demonstrate that India may lessen income disparity by emulating the policies of middle- and high-income countries. The effects of economic globalisation on income inequality globally have been examined in a sizable body of econometric work. It is challenging to derive reliable conclusions since stated econometric estimations vary widely. The link between globalisation and inequality is summarised quantitatively and analysed in this work. Making use of a brand-new dataset with 1,254 observations from 123 primary research. They arrive at a number of key conclusions by using meta-analysis and meta-regression techniques. First, there is a small to moderate increase in inequality as a result of globalisation. Second, whereas the impact of trade globalisation is negligible, the impact of financial globalisation on inequality is much larger and substantially stronger. Third, both developed and developing nations see an average increase in inequality as a result of globalisation. Fourth, technology and education mitigate the effects of globalisation on economic disparity.