Rising Income Inequality: Technology, or Trade and Financial Globalization?

International Monetary Fund Working Paper No. WP/08/185

38 Pages Posted: 31 Jul 2008

See all articles by Florence Jaumotte

Florence Jaumotte

Organization for Economic Co-Operation and Development (OECD)

Chris Papageorgiou

International Monetary Fund (IMF) - Research Department

Subir Lall

International Monetary Fund (IMF)

Multiple version iconThere are 2 versions of this paper

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

Jaumotte, Florence and Papageorgiou, Chris and Lall, Subir, Rising Income Inequality: Technology, or Trade and Financial Globalization? (July, 24 2008). International Monetary Fund Working Paper No. WP/08/185. Available at SSRN: https://ssrn.com/abstract=1175363 or http://dx.doi.org/10.2139/ssrn.1175363

Florence Jaumotte

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Chris Papageorgiou

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Subir Lall (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202 623 6113 (Phone)

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