Economic globalization is an opportunity to exchange culture, resources, and wealth, while other disciplines see it as an exchange of self and even an exchange of order. Additionally, economic globalization can be perceived as a “zero-sum game,” with only winners and losers. The primary debate surrounding this topic is that economic globalization will increase a country’s wage gap. More specifically, the effects of globalization may lead to an increase in within-country income inequality: a measure of the income difference between citizens of the same country.
In this thesis, the author analyzes the relationship between economic globalization and income inequality. A primary tool in the author’s methodology is an Ordinary Least Squares Regression: a test that identifies unknown variables in a linear regression. The regression focuses on a prime age group between 25 to 59 years old and on some unknown variables, including the Gross Domestic Product per Capita and the Polity IV score of a country. The results help incorporate the known and unknown variables to gain a holistic understanding of what contributes to within-country income inequality. Some attainable variables include the Gini coefficient—a 0 to 1 score based on a country’s income disparity—and ethic fractionalization—the idea that population diversity correlates to political instability. These variables are essential contexts for globalization, indicating that within-country income inequality is a result of extensive casualties.
In actuality, there is no statistically significant correlation between economic globalization and within-country income inequality. The linear regression model and the depth of casualties linked to within-country income inequality indicate that economic globalization does not produce greater wage gaps. Instead, there is a more significant, positive correlation between within-country income inequality and ethnic fractionalization. Factors such as ethnic conflict, racism, and other forms of discrimination contribute to wage gaps in developed and developing countries. These results are not holistic and cannot identify a direct cause and effect chain; however, the results successfully indicate that within-country income inequality and economic globalization are not the only cause and effect at play. Other elements such as economic and political-institutional integrity could be linked.
Overall, economic globalization is not the sole culprit of within-country income inequality. The results indicate additional economic and societal factors that contribute to increased wage gaps. These supplemental factors and their relationship to within-country income inequality can and should be further researched.
Kevin Nicolai is a graduate from the College of Social Sciences at Florida State University. This post is a summary of Kevin’s honors thesis, written by COSSPP Blog Intern Camila Levy. You can learn more about Kevin here. You can learn more about this project here.