The effects of economic globalisation and ethnic fractionalisation on redistribution

Abstract

We examine the effect of economic globalisation on income redistribution and hypothesise that it depends on ethnic fractionalisation. In highly fractionalised countries, powerful ethnicities are able to extract globalisation-induced benefits, whereas their governments face substantial political obstacles when redistributing income between ethnic groups. Using the newly constructed KOF Globalisation Index, we find supportive evidence for the interactive effect of ethnic fractionalisation and de jure financial globalisation on redistribution. In particular, the total effect of de jure financial globalisation on redistribution is negative in highly fractionalised countries. Governments in these countries are apparently not only reluctant to offset potential consequences stemming from de jure financial globalisation, but they even reduce redistribution to lower levels.

Does globalisation alleviate polarisation?

“…According to Bergh and Gustafsson (2019) and Pleninger and Sturm (2020), economic globalisation is most likely to affect polarisation. For example, Autor et al (2020) illustrate that the regions in the United States exposed to significant Chinese import penetration experience more political polarisation, which is measured by public support for politically extremist candidates.…”

Is the Relocation of Polluting Industries Prompted by FDI Flow and Stock, Globalisation, Corruption and Regulation?

“…This new measurement of globalisation allows a complex and extensive analysis of globalisation and avoids biased findings resulting from the use of aggregate indexes [ 37 ]. Even though the analysis of the new measures of globalisation is scarce in the literature [ 19 , 26 , 38 ], its advantages have already been revealed [ 37 ]. Briefly, distinguishing globalisation into de jure and de facto aspects is considered crucial to discern the environmental impacts of globalisation [ 39 ].…”

Does ICT maturity catalyse economic development? Evidence from a panel data estimation approach in OECD countries

“…In this regard, income inequality addresses the distributional aspects of economic growth and also indicates whether economic development is inclusive. Moreover, several studies indicate that globalisation is positively correlated with economic development ( Dreher, 2006 , Pleninger and Sturm, 2020 , Ulucak et al, 2020 ).…”

“…The index score ranges from 1 to 100. The higher the score higher the degree of globalisation Pleninger and Sturm (2020) ; Ulucak et al (2020) GFCE 19.33 19.50 9.93 27.94 3.78 Government final consumption expenditure (as % of GDP) Andrašić et al (2018) ; Machova and Kotlan (2013) Exp 50.20 41.23 10.65 222.70 32.39 Total export earnings (as % of GDP) Amirkhalkhali and Atul (2019) ; Konstantakopoulou (2017) Inv 23.00 22.69 9.82 41.54 4.53 Total public and private investment (as % of GDP) Andrašić et al (2018) ; Ghosh (2019) Note: GDPG GDP growth, Gini Gini index, PE Public expenditure on the social sector, Forest Forest area, GovtEff government effectiveness, Vote Vote share of the elected government, and OverGovtIdeol Overall ideology of the government. Med: Median; Max: Maximum; Min: Minimum; Std.…”