Trade Openness, Financial Openness and Income Inequality: Empirical Evidence for MIST Countries/ Ticari Açıklık, Finansal Açıklık ve Gelir Eşitsizliği İlişkisi: MIST Ülkeleri için Ampirik Bulgular

Abstract

Since the 1980s, income inequality has increased significantly in developed and developing countries. The literature has also seen studies that attempt to explain this rising trend in income inequality. Some studies explaining the increase in income inequality in various ways have focused on economic globalization. Questions on how the steps taken towards liberalization in international trade and finance and increasing market integration affect income inequality have been at the center of the discussions in these studies. Uncertainty about the direction and extent of the link between globalization and inequality persists primarily because of the conflicting empirical findings in the literature. This study aims to contribute to the literature by conducting an empirical analysis of MIST countries with data covering 1987-2019. The study's findings, which used panel data analysis to assess the data, showed that while trade and financial openness reduce income inequality for MIST countries over the analyzed period, foreign direct investments do the opposite. The results also showed that the effect of financial openness on income inequality is greater than the effect of trade openness. It is also discovered that the rate of per capita income increase has no statistically significant impact on income inequality.