Has Globalization Increased Inequality?


  • We thank participants of the AUEB and CESifo–Delphi Conference on “Global Economic Imbalances: Prospects and Remedies,” 2–3 June 2006, Delphi, Greece, and two anonymous referees for valuable comments.

Dreher (corresponding author): ETH Zurich, KOF Swiss Economic Institute, Weinbergstrasse 35, CH-8092 Zürich, Switzerland, and CESifo, Germany. Tel: +41 44 632 8311; Fax: +41 44 632 1218; E-mail: mail@axel-dreher.de. Gaston: Globalisation and Development Centre and School of Business, Bond University, Gold Coast, Queensland 4229, Australia. Tel: +61 7 5595-2220; Fax: +61 7 5595-1160.


There is no shortage of theories that purport to explain why globalization may have adverse, insignificant, or even beneficial effects on income and earnings inequality. Surprisingly, the empirical realities remain an almost complete mystery. In this paper, we use data on industrial wage inequality, household income inequality as well as measures of the economic, social and political dimensions of globalization to examine this controversial issue. Overall, while we find that globalization has exacerbated inequality; this is particularly true in the case of income inequality in OECD countries.