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

38 Pages Posted: 12 Sep 2008

See all articles by Florence Jaumotte

Florence Jaumotte

Organization for Economic Co-Operation and Development (OECD)

Subir Lall

International Monetary Fund (IMF)

Chris Papageorgiou

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: July 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 distribution, Globalization, Foreign direct investment, Human capital, Education, Economic models, Trade models

JEL Classification: F13, G32, O11, O15, O16, O33

Suggested Citation

Jaumotte, Florence and Lall, Subir and Papageorgiou, Chris, Rising Income Inequality: Technology, or Trade and Financial Globalization? (July 2008). International Monetary Fund Working Paper No. WP/08/185. Available at SSRN: https://ssrn.com/abstract=1266518

Florence Jaumotte (Contact Author)

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

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Subir Lall

International Monetary Fund (IMF) ( email )

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

Chris Papageorgiou

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

700 19th Street NW
Washington, DC 20431
United States

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