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Rising Income Inequality: Technology, or Trade and Financial Globalization?

Author/Editor: Jaumotte, Florence | Lall, Subir | Papageorgiou, Chris
Authorized for Distribution: July 1, 2008
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.

Summary: We examine the relationship between trade and financial globalization and the rise in inequality in most countries in recent decades. We find technological progress as having a greater impact than globalization on inequality. The limited overall impact of globalization reflects two offsetting tendencies: whereas trade globalization is associated with a reduction in inequality, financial globalization-and foreign direct investment in particular-is associated with an increase. A key finding is that both globalization and technological changes increase the returns on human capital, underscoring the importance of education and training in both developed and developing countries in addressing rising inequality.
 
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Series: Working Paper No. 08/185
Subject(s): Income distribution | Globalization | Foreign direct investment | Human capital | Education | Economic models | Trade models
Author's keyword(s): Income inequality | mechanisms | trade globalization | financial globalization | technological progress | FDI.
 
English  
    Published:   July 1, 2008        
            Format:   Paper
    Stock No:   WPIEA2008185   Pages:   36
    Price:   US$18.00 (Academic Rate: US$18.00 )
       
     
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