Globalization and Inequality

The World Economic Outlook (an IMF publication) dedicates a full chapter to exploring globalization's impact on income inequality. "Over the past two decades, income growth has been positive for all quintiles in virtually all regions and all income groups during the recent period of globalization. At the same time, however, income inequality has increased mainly in middle- and high-income countries, and less so in low-income countries."

The study highlights the distinct causal forces exerted by trade and foreign direct investment. Trade and trade liberalization reduce inequality; foreign direct investment increases inequality.

The bottom line, however, is that technological change rather than globalization per se is the main cause of rising income inequality.