Globalization and Income Inequality

by Don Boudreaux on March 14, 2007

in Inequality, Trade

Another investigation — this one by Fernando Borraz and Jose Ernesto Lopez-Cordova — of some of the economic consequences of freer trade finds that freer trade has not increased income inequality in Mexico:

Our findings strongly indicate that globalization has not raised income
inequality in Mexico. On the contrary, we present compelling evidence
showing that income distribution is more equitable in states that are
more closely linked to the world economy and that those states exhibit
larger declines in inequality. We also find some statistical evidence
suggesting that deepening globalization results in reduced inequality,
although our results are sketchier on this point, perhaps because such
effect is only observable in the long run. As a potential explanation
of why globalization might improve the distribution of income among
Mexican households, we show that states that are more integrated to the
world economy offer better work opportunities for low-skilled women
relative to more educated female workers.


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