Title: Economic Globalization and Household Income Inequality: An Empirical Study of Taiwan
Abstract: Since the 1980s, Taiwan has adopted trade liberalization policies and gradually promoted financial liberalization; meanwhile, the extent of household income inequality has become pronounced over time. The goal of this paper is to empirically investigate whether economic globalization (trade and financial liberalization) has led to the rising household income inequality in Taiwan. Our analysis is based on time-series data from 1980 to 2013 with the consideration of five domestic control variables. The empirical results show that trade openness reduces the income inequality, whereas capital outflows result in an increase in income inequality. Since capital outflows only constitute a very small share of GDP, economic globalization tends to lower income inequality overall. Our results indicate that technological progress in favor of skilled labor is the main driver of the rising household income inequality. Higher education increases the relative supply of skilled workers and also adversely affects the income distribution. However, the massive expansion of higher education beginning in the 1990s helps reduce the income inequality. In addition, the two financial reforms implemented in 2002 and 2004 also contribute to higher income inequality.
Publication Year: 2019
Publication Date: 2019-01-01
Language: en
Type: article
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