The Impact of Globalization on Income Inequality: A study of OIC countries

Abstract

The present study investigated the possible nexus between social globalization, economic globalization, political globalization, and their de facto and de jure and income inequality in 53 OIC countries. This study uses balanced panel data because it collects the data repeatedly for the sample countries from 2000 to 2019. The data for income inequality gather from World Inequality Database (WID, 2021) because it provides updated data for all the countries of the world from 1800 to 2021. However, the data for all the independent variables collect from the KOF globalization Index-revisited (2021). The study uses EGLS with RM and FE estimators. However, the correlated random effect-Hausman LM test is used to select a suitable model between RE and FE estimators. Further, to endorse the validity and robustness of the regression model, the present research employed different econometrics tests. For instance, descriptive statistics, correlation matrix, Pesaran’s CD and Breusch-pagan LM tests of cross-section dependence, jarque-bera test of normality, VIF, and Durbin Watson’s. The findings reveal that in low-income OIC countries social globalization, economic globalization, and their de facto and de jure dimensions have a significantly negative impact on income inequality. It shows that income inequality decreases when social globalization, economic globalization, and their de facto and de jure increase. However, the results reveal that political globalization and its de jure and de facto dimensions have a significantly positive impact on income inequality. It shows that income inequality increases when political globalization and its de jure and de facto increase. On the other hand, the finding reveals in low-middle-income OIC economies, that economic globalization and its de jure and de facto, social globalization de facto, and political globalization have no significant impact on income inequality. However, political de jure has a significant and positive relationship with income inequality but social globalization, DRSML QAU xv political globalization de facto, and social globalization de jure have a significant and negative relationship with income inequality. Furthermore, the findings reveal in upper-middle-income OIC countries, that economic globalization has no impact on income inequality. However, political globalization, political globalization de jure, political globalization de facto, economic globalization de jure, social globalization, social globalization de jure, and social globalization de facto have a negative relationship with income inequality but economic globalization de facto has a positive relationship with income inequality. On the other side, the results reveal in high-income OIC countries, that social globalization, economic globalization, political globalization, economic globalization de facto, and social globalization de jure have no relationship with income inequality. However, economic globalization de jure has an inverse relationship with income inequality. Moreover, the results reveal that political globalization de jure and political globalization de facto have a significantly positive impact on income inequality. However, social globalization de facto has a significantly negative association with income inequality in high-income OIC economies. Furthermore, the results disclose in overall income OIC countries, that political globalization, political globalization de jure, political globalization de facto, and economic globalization have no impact on income inequality. However, social globalization de jure and economic globalization de facto have a significantly positive relationship with income inequality while social globalization, social globalization de facto, and economic globalization de jure have significantly an inverse relationship with income inequality in overall OIC countries. Keywords: Globalization, Political globalization, Political globalization de jure, Political globalization de facto, social globalization, social globalization de jure, social globalization de DRSML QAU xvi facto, Economic globalization, Economic globalization de jure, Economic globalization de facto, Income inequality, EGLS, FE, RE