The Impact of Globalization on Income Distribution: The Case of Hungary

Abstract

This study investigates using Ordinary Least Squares (OLS) methodology the impact of globalization on income distribution for the period 1990–2009 in Hungary. The empirical findings are in line with the conventional wisdom that opening up a national economy into the international market tends to decrease income inequality. Income distribution can be fairer by increasing trade volume and foreign capital penetration, while remittances can also have a positive effect. However, huge trade volume with negative trade balance or foreign direct investments that favor only the more skilled workers may lead to negative results. The globalization process can be beneficial but its nature should be closely monitored.

Keywords: income distribution, trade openness, foreign direct investments, remittances

JEL Classification: D31, F10, F21, F24