Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

8

Publisher

Utah State University Department of Economics

Publication Date

2006

Rights

Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.

First Page

1

Last Page

31

Abstract

The issue studied in this paper is whether globalization affects income inequality within countries. Using the newly created Kearney (2002, 2003, 2004) data and the principal component analysis (PCA), we create two globalization indices. The Gini coefficient of a country is regressed on the indices respectively. One of the globalization indices is the equally weighted index. The other is derived from PCA. Sixty countries were involved in this study, including both developed and developing countries. The main conclusions obtained from the analysis can be summarized as follows: there is a negative relationship between the globalization index and the Gini coefficient for all 60 countries in the study and the relationship is robust. Therefore, there is evidence supporting the claim that globalization help reduce income distribution inequality within a country. Previous studies suggest that education and urbanization are two major factors affecting income distribution within a country. In this analysis, increasing the educational level significantly reduces income inequality within a country, especially for developed countries. However, urbanization shows little explanatory power in the regression models.

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