Pakistan Institute of Development Economics

THE PAKISTAN DEVELOPMENT REVIEW 

Does Globalisation Shape Income Inequality? Empirical Evidence from Selected Developing Countries

As economies of the world are getting more and more interdependent, hence, a large segment of economic literature investigated the impact of globalisation on income inequality. However, the empirical investigations on the impacts of globalisation on income distribution are still inconclusive. Keeping in view the inconclusiveness, in this study we investigated the relationship between globalisation and income inequality using five different proxies of globalisation. The empirical analysis estimates five empirical models by using a panel data approach for a set of 44 developing countries spanning from 1980–2014. Considering the nature of data set, the empirical estimation has been carried out through GMM estimation technique. The findings of the study reveal that overall globalisation cannot explain income inequality; however, we found insights for the positive relationship between economic globalisation and income inequality in the sample countries. In addition, the findings of the study also indicate that average, and effective tariff rates explain negatively income inequality in the sample countries. Based on study findings, it is safely concluded that economic globalisation and income inequality move parallel in the sample countries.

MIRAJUL HAQ, IFTIKHAR BADSHAH, and IFTIKHAR AHMAD

 

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