Economic Globalization and National Income Inequality: An Empirical Analysis Using Transnational Panel Data

Abstract

The relationship between globalization and income equality has long been a focal point of scholarly attention. This study introduces the ratio of dependence on foreign trade as a measure of globalization within a panel data model to analyze its effect on the Gini coefficient across various countries. Both the random effects model and the fixed effects model were rigorously evaluated, with the robust fixed effects model ultimately deemed the optimal approach. Empirical findings indicate that the influence of economic globalization on income distribution is multifaceted and varies significantly. Theoretically, the effects of globalization on income inequality both between countries and globally are indeterminate, contingent upon the specific circumstances of individual nations and the particular dimensions of globalization in question. Increasing income inequality between countries can lead to social unrest and international issues, underscoring the importance and practical significance of studying income inequality. Consequently, the study offers differentiated policy recommendations tailored to the unique contexts of various countries. For policymakers, selecting development strategies that best suit their nation's specific needs is crucial for fostering economic development.