Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys

Abstract

New data derived directly from household surveys are used to examine the effects of globalization on income distribution in poor and rich countries. The article looks at the impact of openness (proxied by the ratio of trade to GDP) and of direct foreign investment on relative income shares across the entire income distribution. It finds strong evidence that at low average income levels, the income share of the poor is smaller in countries that are more open to trade. As national income levels rise, the incomes of the poor and the middle class rise relative to the income of the rich. The article explains why using the trade to GDP ratio in purchasing power parity terms, as favored by some analysts, is inappropriate in studies of the effect of trade on income distribution.

A contribution to the analysis of historical economic fluctuations (1870–2010): filtering, spurious cycles, and unobserved component modeling

“…30 From the mid-1980s until 2007, the gradual reduction of inflationary trends in the industrialized world was referred to as the "Great Moderation" thanks to the reduction in the volatility of GDP growth in Australia, Canada, the USA, the UK, Germany, Japan, France and Italy (Summers 2005). 31 For other approaches that examined business cycle fluctuations and monetary policy regimes, see Bergman et al (1998);Milanovic (2005); and Piketty and Saez (2006). of the importance of the common factor grouping all of the economies (i.e., a global factor) with respect to business cycle dynamics.…”

Phenomenological Approach in Gauging Native Community Quality of Life

“…The same opinion is expressed by Easterlin (2001) who concluded that aspects of income and financial situation as well as physical and psychological needs are the key indicators of the rural community's quality of life in several developing countries. In the meantime, Diener and Lucas (2000), Ravallion (2001) and Milanovic (2002) in their studies found that communities who live in the rural areas are more inclined to choose objective well-being such as material aspects and basic facilities as the main indicator in determining their quality of life.…”

Foreign Direct Investment and Income Inequality revisited

“…In their OLS analysis of cross-section and time-series data they find no significant results for a correlation between FDI and inequality measured by the Gini coefficient. Milanovic [2003], assessing the influence of globalization on income deciles derived directly from household surveys, also cannot find any significant influence of FDI on income distribution. 4 In a brief review of the existing literature Nunnenkamp and Thiele [(2004), pp.…”