Abstract
The contemporary era is one of both accelerated economic globalization and rising inequality. There is an increasing awareness among both academic scholars and development professionals that globalization puts certain populations at risk. However, there has been inadequate theoretical analysis and a lack of up to date empirical studies that explain just how contemporary globalization a?ects inequality and the well being of individuals. This study explores the conditions under which TNC penetration and other globalization processes in?uence change in domestic income distribution. Its aim is to investigate whether theoretical models that have proven successful in explaining di?erences in income inequality cross-sectionally also allow for an understanding of the dynamics of income distribution during the 1980s and early 1990s, an era characterized by a dramatic acceleration of globalization. We present an analysis of change in national income distribution using linear regression models with a panel design. This study suggests that dependence on foreign investment as a development strategy, especially compared to domestic and human capital investment, may be misguided for nations concerned with equality. Net of other factors, foreign investment dependence bene?ts the elite segments of the income-earning population over the poorer eighty percent. Our analysis provides evidence of a shift in capital/labor relations brought about by globalization that has signi? cantly contributed to the rise in income inequality seen throughout the world.
Highlights
The contemporary era is one of both accelerated economic globalization and rising inequality
Its aim is to investigate whether theoretical models that have proven successful in explaining differences in income inequality cross-sectionally allow for an understanding of the dynamics of income distribution during the 1980s and early 1990s, an era characterized by a dramatic acceleration of globalization
This paper presents an analysis of change in national income distribution using linear regression models with a panel design
Summary
The contemporary era is one of both accelerated economic globalization and rising inequality. Urbanization and internal migration are related to these processes, and indicators such as percent of labor force in agriculture have been found to be associated with income inequality at lower levels of development (Crenshaw 1992, 1993; Simpson 1993; Nielsen and Alderson 1997). The most common operationalization of investment dependence is transnational corporate penetration (PEN), the ratio between inward foreign direct investment (FDI) stock and GDP This measure has been found to be significantly associated with high levels of inequality in developing nations. Development Indicators 1998) Natural rate of population increase This measure is operationalized as the crude birth rate minus the crude death rate and is intended to capture the effect of the demographic transition and generalized sociocultural dualism on income distribution (Nielsen and Alderson 1995).
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