Has Globalization Mitigated Regional Income Inequality? : Evidence from Korea

Abstract

Purpose This study aims to analyze the effect of globalization on alleviating income inequality in Korea by applying the variables of GRDP per capita, FDI, Trade Openness, and Human Capital during the period of 1998-2017 at regional level, not at the national level. Design/Methodology/Approach This study has applied the quantile regression model to analyze the heterogeneous effects of regions with notably large or small regional income disparity, not an OLS model that analyzes the average influence of globalization on the income inequality between regions. Findings The results of this study are as follows. First, the relationship between regional growth and income inequality in Korea’s globalization existed in parallel with Kuznets hypothesis and Baro’s hypothesis. Next, exogenous factors such as FDI and Trade Openness showed the effect of softening the income gap only for some income quintiles in specific regions. Finally, human capital served as a factor that exacerbated income inequality, excluding some income quintiles of the southeastern region. Research Implications The regional income gap should be alleviated by not only expanding the market value but also creating new regional demand by discovering industries with a large ripple effect from globalization and items with a comparative advantage, and fostering high-skilled labor that can absorb externalities.