Globalization and comparative compositional inequality

Abstract

AbstractGlobalization has been one of the biggest driving forces of the last half century. There has been substantial disagreement about the impact that increased international integration has on income inequality. Though most agree that globalization positively affects economic output, it is no surprise that it leads to relative winners and losers within nations. The question that remains is where in the income distribution are these relative gains and losses occurring? We offer a broader picture of globalization's effects on inequality by using a dynamic compositional approach to test the impact of globalization and relative factor endowments on the composition of income. Using data from four countries, we model the effects of globalization on quantiles of the income distribution. Our findings suggest that globalization has substantial (and divergent) effects across income strata, and that these effects differ across nations based on relative factor endowments.