Abstract

In this research, the relationship between income inequality and the KOF index of globalization is determined using panel data covering G7 countries 1970-2010. This study applying Kónya (2006)’s bootstrap panel Granger causality test, which takes into account cross-sectional dependence and slope heterogeneity simultaneously, analyzes the impact of globalization on income inequality in terms of economic, social, political and overall dimensions among examined countries. Empirical results indicate one-way causality from economic globalization to income inequality in Canada and France, two-way causality between economic globalization to income inequality in only the UK; one-way causality from social globalization to income inequality in France and the UK; one-way causality from political globalization to income inequality in only France. When analyzing the causality between the aggregate globalization and income inequality, it is observed that overall globalization positively causes income inequality in Canada and the UK and negatively in France, while in the case of Germany, Italy, Japan and the USA there is no empirical evidence of causality between globalization indices and income inequality in either direction.

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