Rising Income Inequality: Technology, or Trade and Financial Globalization?
IMF Working Papers, July 1, 2008
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- Rising Income Inequality: Technology, or Trade and Financial Globalization?
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Bibliographic details
- Authors: Chris Papageorgiou, Subir Lall, Florence Jaumotte
- Published: July 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870435.001
Summary findings
- The study examines the relationship between trade and financial globalization and the rise in inequality in most countries in recent decades.
- Technological progress has a greater impact on rising inequality than globalization.
- Globalization has a limited overall impact on inequality because of two offsetting tendencies:
- Trade globalization is associated with a reduction in inequality.
- Financial globalization—and foreign direct investment in particular—is associated with an increase in inequality.
- Both globalization and technological changes increase the returns on human capital.
- Emphasis on the importance of education and training in both developed and developing countries to address rising inequality.
Policy implications and recommendations
- Prioritize education and training policies to enhance human capital returns and mitigate inequality driven by technological progress and globalization.
- Recognize differentiated effects of globalization channels:
- Support policies that amplify the inequality-reducing aspects of trade globalization.
- Implement measures to manage the inequality-increasing effects associated with financial globalization and foreign direct investment.