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A revisit to the relationship between globalization and income inequality: are levels of development really paramount?

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Abstract

The European Union is an important example of economic integration and regional cooperation. The expectation from the EU is to ensure a more equitable distribution of income among the members of the union. However, especially after 1980, inequality raises were seen within income groups and new members. It is aimed to determine the effects of the important determinants of globalization on the increasing inequality in the EU-28 countries by this study. The aim of this study is to determine the effects of important determinants of globalization on increasing income inequality in EU-28 countries. In the study, using data from 1995 to 2018, the relationship between globalization and income inequality was examined by panel quantile analysis method. The findings of the analysis helped us to see the effect of inequality variables within the various degrees of inequalities. It is aimed to contribute to the literature with the panel quantile approach, which we applied by examining the possible effects at different levels of development with different quantiles. In our study, we found that both trade openness and stock market capitalization reduce poverty at all levels of development. While R&D expenditure has a positive effect on medium and high levels of inequality, FDI at low and medium levels of inequality has a lowering effect on inequality. Finally, the effect of economic growth on income distribution increases inequality in all quantiles except the 90th. However, this effect of economic growth diminishes as the level of inequality increases and the GDP has an equalizing effect in the highest inequality countries.

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Source World Inequality Database https://wid.world

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Notes

  1. According to 2016 World inequality data: {Top 1% = share % 20.4}, {Top 10% = share % 52.1}, {Bottom 50% = share % 9.7}, {Middle 40% = share % 38.2}.

  2. Austria, Belgium, Bulgaria, Croatia, Cyprus, Czechia, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, United Kingdom.

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Authors and Affiliations

  1. Faculty of Economics and Administrative Sciences, Nevşehir Hacı Bektaş Veli University, Nevşehir, Turkey

    Volkan Han

  2. Faculty of Applied Sciences, Kayseri University, Kayseri, Turkey

    Oguz Ocal

  3. Department of Aviation Management, Faculty of Aeronautics and Astronautics, Erciyes University, Kayseri, Turkey

    Alper Aslan

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  1. Volkan Han
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Correspondence to Oguz Ocal.

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Han, V., Ocal, O. & Aslan, A. A revisit to the relationship between globalization and income inequality: are levels of development really paramount?. Qual Quant 57, 973–990 (2023). https://doi.org/10.1007/s11135-022-01402-z

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