Financial globalization and income inequality nexus: panel quantile regression approach

Abstract

PurposeThe general purpose of the paper is to examine the effect of financial globalization on income inequality. The specific purposes are: 1) To examine the effect of overall financial globalization on income inequality. 2) To analyze whether de facto and de jure financial globalization have differential effects on income inequality. 3) To scrutinize whether the effect of financial globalization on income inequality varies across countries of different income groups and quantiles of income inequality.Design/methodology/approachThe authors employed panel quantile regression using 73 countries over 2000–2016 to examine the effect of financial globalization on income inequality. The authors employed fixed effect and panel quantile regressions and classified the countries into income groups to compare differential effects of financial globalization across different income groups. Further, the authors unbundled financial globalization into de facto and de jure financial globalizations to investigate whether their effects on income inequality vary.FindingsOverall financial globalization raises income inequality more at lower quantiles of inequality. De jure financial globalization reduces income inequality in high-income countries. In high-income countries, de jure financial globalization has more favorable income distribution at lower quantiles of inequality. In contrast, de facto financial globalization raises inequality regardless of income classification of the countries.Originality/valueTo the best of the authors’ knowledge, the authors for the first time employed panel quantile regression to analyze whether financial globalization affects income inequality across different quantiles. In addition to de facto globalization, the authors used the newly developed de jure financial globalization index to examine its impact on income inequality. The de jure dimension is largely neglected in the literature. The authors provide empirical evidence on how the different dimensions of financial globalization, de facto and de jure, impact inequality in high-income, middle-income and low-income countries.

Impact analysis of bilateral trade openness and income inequality based on the system GMM method: A case study of transnational dynamic panel data

“…Overall, there is a positive correlation between immigration and per capita income levels and favorable economic and environmental indicators (McFarland, Hill, & Montez, 2023). Relevant studies suggest that population migration reduces Region II (Kebede & Tawiah, 2023). Immigrant groups typically have a higher level of education than residents.…”

The nonlinear relationship between poverty and financial globalisation: A panel quantile regression approach

“…Second, the relationship is sensitive to differences in the operationalization of financial globalisation and poverty measures (Gygli et al, 2019; Quinn et al, 2011). In particular, due to data limitations, past works focus on de facto measures and neglect de jure globalisation measures (Kebede & Tawiah, 2021). We address these limitations in the prior literature in several ways.…”

“…Second, due to data limitations, prior works have generally focused only on de facto globalisation measures (actual flows, such as goods, capital, people, and information), and neglected de jure globalisation measures (policies related to flows of goods, capital, people and information; Kebede & Tawiah, 2021). This distinction is important as studies on the nexus between financial liberalisation and macroeconomic outcomes can arrive at systematically different findings depending on the choice of using either de facto or de jure measures (Bataka, 2019; Gygli et al, 2019; Quinn et al, 2011).…”