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Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys

Year: 2005

Type: article

Abstract: New data derived directly from household surveys are used to examine the effects of globalization on income distribution in poor and rich countries. The article looks at the impact of openness (proxied by the ratio of trade to gdp ) and of direct foreign investment on relative income shares across the entire income distribution. It finds strong evidence that at low average income levels, the income share of the poor is smaller in countries that are more open to trade. As national income levels rise, the incomes of the poor and the middle class rise relative to the income of the rich. The article explains why using the trade to gdp ratio in purchasing power parity terms, as favored by some analysts, is inappropriate in studies of the effect of trade on income distribution.

Source: The World Bank Economic Review

DOI: 10.1093/wber/lhi003

Author: B. Milanovic

Institutions: Carnegie Endowment for International Peace, World Bank, World Bank Group

Language: English

Topic: Income, Poverty, and Inequality

Subfield: Sociology and Political Science

Field: Social Sciences

Domain: Social Sciences

SDGs: Reduced inequalities, No poverty, Decent work and economic growth

Open Access status: bronze

OpenAlex ID: W2122377199