Rising Income Inequality: Technology, or Trade and Financial Globalization?
International Monetary Fund Working Paper No. WP/08/185
38 Pages Posted: 31 Jul 2008 Last revised: 21 Sep 2020
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Rising Income Inequality: Technology, or Trade and Financial Globalization?
Rising Income Inequality: Technology, or Trade and Financial Globalization?
Date Written: July 24, 2008
Abstract
We examine the relationship between trade and financial globalization and the rise in inequality in most countries in recent decades. We find technological progress as having a greater impact than globalization on inequality. The limited overall impact of globalization reflects two offsetting tendencies: whereas trade globalization is associated with a reduction in inequality, financial globalization-and foreign direct investment in particular-is associated with an increase. A key finding is that both globalization and technological changes increase the returns on human capital, underscoring the importance of education and training in both developed and developing countries in addressing rising inequality.
Keywords: Income inequality, mechanisms, trade globalization, financial globalization, technological progress, FDI
JEL Classification: F13, G32, O11, O15, O16, O33
Suggested Citation: Suggested Citation
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