The Effects of Exports, Public Debt, and Development on Income Inequality

Abstract

Classical economics and most modernization theorists hold that a curvilinear relationship exist between income inequality and development level. In this article that relationship is tested. In addition, it is hypothesized that exports and debt as percentages of gross domestic product increases individual income inequality. Regression analyses with controls for development and time were used to test these relationships (N=28 at two time periods). To test these hypotheses with additional data a panel cross-section design was used with data for countries where it is not available a two separate times (N=37 and N=46). The results do not provide evidence to support a curvilinear relationship between development and income distribution when controls for dependency are included in the regression equation. The results from all six regressions presented support the hypothesis that exports enhance income inequality. Moreover, a covariant analysis indicates that exports effect inequality significantly more in undeveloped countries than in developed countries. It is concluded that for less developed countries pursuing export-oriented production, income does not become more evenly distributed at later stages of development.A substantial proportion of the development literature has addressed the notion of inequality, and an attempt has been made to provide insights into the factors which contribute to inter-country differences in inequality. In the past few years, a number of social scientists have enhanced our knowledge in the area through cross-national research (Paukert

The Resilience of Dependency Effects in Explaining Income Inequality in the Global Economy: A Cross National Analysis, 1975-1995

“…Export-oriented production for the world market creates sector dualism in which the primarily foreignowned export segment of the economy monopolizes internal capital and repatriates profi ts, stagnating the domestic sector. Th e empirical evidence indicates that large export sectors are positively related to income inequality (Stack 1980;Prechel 1985). Th e considerably more capital-intensive nature of export production results in higher returns to capitalists at one end and the underemployment of the indigenous labor force at the other.…”

“…While size of the export sector has been found to be associated with inequality, other dependency measures such as commodity concentration and debt service have not been found to be signifi cantly related to income inequality (Weede and Tiefenbach 1981;Prechel 1985;Chan 1989). However, dependency scholars stress the dynamic nature of global capitalism, and how the changing character of capitalist exchange on a global scale is coupled with alterations in the nature of the relations of dependency among the participants.…”

“…However, dependency scholars stress the dynamic nature of global capitalism, and how the changing character of capitalist exchange on a global scale is coupled with alterations in the nature of the relations of dependency among the participants. Many of these researchers argue that, for the past twenty to thirty years, cross-national capital transfers are more indicative of dependency than are trade-based measures (Prechel 1985;Chan 1989).…”

“…Th e considerably more capital-intensive nature of export production results in higher returns to capitalists at one end and the underemployment of the indigenous labor force at the other. Moreover, wages are depressed by limited labor force mobility between sectors due to lack of skill transferability, low education levels, and various social and legal barriers (Amin 1976;Prechel 1985). Prechel (1985) argues that the productive capacities and structure of the export and traditional economic sectors of developing nations are linked, not simply temporarily disarticulated.…”

The Global Economy and Changes in the Determinants of Cross-National Income Inequality

“…Bornschier and Ballmer-Cao (1979) found that MNC-penetration increases levels of income inequality through its effects on the power distribution of a country. Galtung (1971) and Prechel (1985) found that trade dependence is positively related to income inequality. However, Chan (1989) found that trade dependence has little influence on income inequality, and Weede and Tiefenbach (1981) found little support for the contention that trade dependence and foreign investment dependence exacerbate income inequality.…”