Trade globalization and national income inequality — are they related?

Abstract

This article takes a comprehensive approach to examining the empirical relationship between trade globalization and national income inequality. We estimate the relationship between trade globalization on national income inequality for a wide panel of countries for the years 1975, 1985 and 1995, and the periods 1975—85 and 1985—95. We also study four subpanels of developed and developing countries and small- and large-population countries. Across a total of 210 permutations of panels, time periods, model specifications and variable operationalizations, we find that inequality is not robustly related to trade globalization, though scattered significant correlations can be detected. Excluding significant results due to one or two influential points, the number of significant correlations across all analyses is no better than chance. We conclude that the increasing levels of inequality recently experienced by the English-speaking countries are more likely caused by country-specific policies than by broad forces related to globalization.