Income Inequality, Welfare Spending, and Globalization

Jennifer Foster, Utah State University

This work made publicly available electronically on May 17, 2012.


This paper examines the relationship between government redistributive spending, globalization, and inequality measures. Does government social spending help to maintain equality within nations? Does this social spending affect less developed nations differently than developed nations? What role does globalization play in this relationship? This paper will examine these questions. The study will be investigated using a cross-­‐sectional panel data set for 12 advanced industrialized and 35 less developed nations. The study finds that in industrialized nations, trade can benefit an economy, while portfolio flows may hurt it. All aspects of governmental spending in OECD nations, including health care spending, education spending, and social security spending, seem to be redistributive and benefit the nation’s development. In less developed nations, the effect of globalization does not seem to have a consistent pattern. Trade and portfolio flows seem to be beneficial in some areas, while harmful in others. Also, government spending is redistributive in some areas and counterproductive in others.