The Distribution of Gains from Globalization

IMF Working Papers, March 13, 2018

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The Distribution of Gains from Globalization

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Bibliographic details

• Authors: Valentin F. Lang, Marina Mendes Tavares
• Published: March 13, 2018
• Series: IMF Working Papers
• DOI: https://doi.org/10.5089/9781484347065.001

Summary and main findings

• Study examines economic globalization as a multidimensional process and investigates its effect on incomes.
• In a panel of 147 countries during 1970-2014, the authors apply a new instrumental variable exploiting globalization’s geographically diffusive character.
• Income gains from globalization:
  • Substantial for countries at early and medium stages of the globalization process.
  • Marginal returns diminish as globalization rises, eventually becoming insignificant.
• Within countries, gains from globalization are concentrated at the top of national income distributions, resulting in rising inequality.
• Domestic policies can mitigate the adverse distributional effects of globalization.

Methodology

• Dataset: panel of 147 countries during 1970-2014.
• Identification strategy: new instrumental variable exploiting globalization’s geographically diffusive character.
• Conceptualization: economic globalization treated as a multidimensional process (globalization index / globalization indicator referenced).

Distributional outcomes (within and across countries)

• Across countries:
  • Early- and medium-stage globalization associated with substantial income gains.
  • High levels of globalization associated with diminishing and eventually insignificant marginal returns.
• Within countries:
  • Gains concentrated at the top of national income distributions.
  • Resulting effect: rising income inequality.

Policy implications and recommendations

• Domestic policies can mitigate the adverse distributional effects of globalization.
• Focus implied on policy measures that address within-country concentration of gains to reduce rising inequality (policy details are discussed in the working paper).

Content in this bundle

• The Distribution of Gains from Globalization, WP/18/54, March 2018
  • The Distribution of Gains from Globalization, WP/18/54, March 2018 (Markdown version)
  • The Distribution of Gains from Globalization, WP/18/54, March 2018 (PDF)