The relationship between globalization economic growth and income inequality

the relationship between globalization economic growth and income inequality

Keywords: Globalization, income inequality, growth, indices, principal project of economic liberalization that subjects states and relationship between inequality and number of channels through which globalization. relationship between globalization and income inequality is a On one hand globalization is considered to promote economic growth and. This study investigates the relationship between globalization and income inequality by developing a new globalization index based on economic growth.

The World Development Report adopts this frame of analysis to argue that three geographical dimensions of the global economy must be transformed to reduce inequality.

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The report argues that these reductions will result from 1 a greater concentration of economic activity density2 a reduction in the friction of distance i. Research in the geographical sciences extends the new economic geography see Part IBox 1positing the fundamental importance of place-based influences on economic developments.

It follows that policy makers need to focus more attention on local contextual influences, a point highlighted by Kates and Dasgupta Along the same lines, Sachs Research in this vein, which has been undertaken by geographically oriented researchers in demography, geography, economics, and political science, has shown that inequality emerges from multiple processes operating simultaneously at a range of spatial scales, including unequal global distributions of returns to production and work at sites along international production and consumption chains; regional trade agreements that limit national sovereignty on environmental and labor protections; and the presence of race and gender discrimination in different places Nagar et al.

Their findings are of relevance to debates about the economic and inequality impacts of market liberalization see generally Firebaugh, ; Milanovic, ; Dicken, ; Kanbur and Venables, Others contend that international trade agreements North American Free Trade Agreement, World Trade Organization that limit the ability of governments to adopt a wide range of protective environmental and social policies contribute to inequality Stiglitz, Page 85 Share Cite Suggested Citation: Striking spatial patterns such as these point to the potential importance of common social and economic histories that situate each of these regions in particular ways within global divisions of labor, commerce, politics, and cultural flows.

the relationship between globalization economic growth and income inequality

Systematic comparisons of subnational inequality and its causes across a range of countries, and in the context of global processes, could move the research agenda forward. Prior research has compared patterns and processes of within-country inequality for Britain, the United States, South Africa, and the former Soviet Union to determine how different economic structures, institutional arrangements and processes of discrimination apartheid, class, gender and race are associated with distinct patterns of spatial and social inequality Smith, Mykhenko and Swain,who provide a contemporary example of research on the links between territorial inequality, post-socialist transition, and the importation of foreign capital.

Page 86 Share Cite Suggested Citation: Their work points to the importance of analyzing the inequality outcomes of international trade treaties, global environmental regulations, global regulations on investments and the activities of transnational corporations, as well as spatial variations in labor standards and laws.

Yet to date, the inequality impacts of these seismic shifts in global institutional and societal processes have not been systematically compared as they play out between and within countries around the globe Murray, ; Dicken, In the next 10 years, researchers will have access to decennial census data and household income surveys from many countries that will allow them to represent and understand the spatial and scalar dimensions of inequality—both between and within countries during a period that will likely be characterized by intensifying globalization and economic instability.

Against this backdrop, the investigation of the following research questions would be particularly productive. A long tradition of geographical work focuses on developing visualizations of spatial patterns that can facilitate deeper understanding of sociospatial processes.

Cartographic representations of inequality across countries and scales reveal current patterns of winners and losers in the face of globalization processes. Appalachia, the Mississippi Delta, areas where indigenous people are concentrated, and much of the U. Drawing on state, county, and metro-scale socioeconomic data across four decades, the Atlas represents the social and spatial dimensions of poverty within each region and identifies vulnerable populations of children, women-headed households, and minorities.

The Relationship between Globalization, Economic Growth and Income Inequality

This within-country representation of variables associated with poverty provides a model for the type of comparative spatial analyses that are needed across countries. New geographical visualization techniques also offer insights into linkages between inequality and the multiple consequences of globalization.

These visualizations demonstrate how fast Internet connectivity for some people and places changes their possibilities for engaging globalization processes, with different implications for places that remain relatively disconnected. The digital divide in Internet connectivity could influence the ways in which places are understood in the future, as volunteer geographical information becomes increasingly central to the collection of georeferenced data about our world.

Those cities and countries that are relatively underresourced in technologies, relevant education, and Internet connectivity will be poorly represented in terms of data accuracy or the range of information available elaborated further in Chapter 11 of this report. In the future, teams of researchers could use geovisualizations to model uncertainty in inequality patterns that may result from distinct scenarios of globalization.

The Relationship between Globalization, Economic Growth and Income Inequality

By representing the possible impacts of global connectivity and isolation, they could inform policy decisions about the implications of connectivity and isolation for access to key resources land, water, energy, etc.

As countries are speeding up their openness in recent years, there have been increasing concerns related to the globalization and its impacts on issues such as economic growth, poverty, inequality, regional differences, cultural dominance, environment, or economic integration. Countries with large heterogeneity in the degree of globalization have shown different development patterns and results.

The different degrees of development have become a source of inequality or poverty. Thus, the link between economic growth, inequality, poverty and globalization has become the focus of attention of many researchers. Despite the increasing interests in the influence of globalization on economic growth and inequality, there are not many empirical studies examining the links between them.

the relationship between globalization economic growth and income inequality

The limited empirical evidence is a result of a lack of theoretical development, limited data and unsatisfactory measures of globalization.

In recent years, several researchers have been developing methods of measurement of globalization to test the relationships mentioned. The limited evidence also suggests contradictory views on the issue. For instance, some argue that globalization provides benefits by enhancing economic development and the reducing inequality of people with high economic opportunity, while others are against globalization due to its restricted beneficiaries.

the relationship between globalization economic growth and income inequality

In general there is an agreement that globalization increases inequality but it reduces poverty while its regional concentration increases. Such development has been observed in India and China.

Currently there is no standard rule of measure and measurement of globalization. The need for research in this area has recently attracted great attention. Several attempts have been made to quantitatively measure globalization.

Different measures ranging from single measures like trade to multidimensional measures with different coverage of various aspects have been produced. The differences are attributed to the availability of data and the technical skill of the researchers.

The globalization index can indicate the level or the progress of globalization of countries which is also in turn changing over time. The globalization index can be employed to quantify its impact on the difference in development or integration of countries, and the index can be used to study the causal relationship between globalization, income inequality and poverty. In addition, the international levels of globalization can be compared over time and across regions to investigate inter-regional and intra-regional comparisons of openness.

The main purpose of this study is to investigate the relationship between globalization and income inequality by developing a new globalization index based on economic growth. Two existing indices of globalization, the Kearney and principal component analysis, are used as benchmarks to compare the results.

The proposed globalization index is decomposed into four sub-components suggested by the Kearney index. The new index is estimated in different forms separated by different economic growth variables. The main feature of this model is the estimation of the globalization index and examination of its relationship with economic development, which is conducted in one single step procedure.

To examine the sensitivity of the relationship between globalization and inequality, we employed different inequality variables in the different models.

All indices including the newly suggested index are compared in respect to their level and development. Various variables employed in the models provide sufficient flexibility to assess the measure and impacts of globalization.

It is expected that the indices provide useful tools to compare the globalization process among countries and the evaluation of the globalization effects on the economies.

This study can also be useful in the construction of a new index of globalization considering the multidimensional nature of the issue and different weights attached to the determinant factors. The empirical analysis is based on a small panel data consisting of 61 developed and developing countries observed during the period — Regression analysis is used to estimate the relationship between income inequality and globalization intensity.

This paper is organized as follows. The literature review on the links between globalization, economic growth and inequality follows in section 2. In section 3 the used data is described. In section 4 previous indices including composite Kearney and principal component-based indices are described. The development of the indices over time and regions is also illustrated and discussed. In section 5, the new index of globalization, based on different component system and its relationship with different economic growth variables, is introduced.

Section 6 includes not only index values, but also the rankings of countries, the regional differences of globalization, and the development of globalization over time. The impacts of globalization on income inequality estimated through regression analyses with various inequality variables are discussed in section 7. Finally, section 8 summarizes the results and concludes this study. The Literature on Globalization, Growth and Inequality Relationships The interest in and amount of research on the relationships between globalization, economic growth and income inequality has been increasing in recent years.

The growing interest is a result of the rapid development of international relations and the speed at which the recent wave of globalization is proceeding.

The theoretical literature on each component is vast but the empirical evidence on the nature and causal relationship between the different interrelated factors of interest remains poor. Thus, there is an urgent need for further research and methodological development at different levels and aspects to shed light on the issues.

Recently, there have been a limited number of studies on different combinations of the links between key factors of interest such as inequality, poverty, growth, trade and globalization.

Aghion and Williamson study the links between globalization, growth and inequality, while Collier and Dollar examine the relationships between globalization, growth and poverty. Mahler shows little evidence of a relationship between economic globalization and the disposable income or earnings of households in the case of developed countries.

Mayer mentioned that globalization gives benefits even to the poor countries for instance in the form of access to new technologies and opportunities, while countries show different technology, skill absorption and development abilities.

Manasse and Turrini examined the impacts of globalization on inequality through trade integration, while Miller argues that globalization leads to a significant increase in income inequality. Lindert and Williamson state that globalization has very different implications for inequality in a country.