Globalization, Government Ideology, and Income Inequality in Developing Countries

Abstract

This article examines how globalization, government ideology, and their interaction have shaped income distribution in 59 developing countries from 1975 to 2005. Using pooled time-series data analysis, the results show that globalization, measured by trade flows and foreign direct investment, has significantly expanded income inequality in developing countries. However, countries with leftist government parties and chief executives have experienced significantly smaller income gaps and even moderated the income inequality from increasing world market integration. The results in this article suggest that the traditional role of government ideology for income redistribution, drawn from the experiences of advanced countries, is applicable to the developing world as well. Rather than being diminished by the integration of international markets, the influence of government ideology will continue to play a key role in shaping the outcomes of globalization.