Over the past five decades, economic globalization has significantly boosted incomes for many individuals worldwide. However, the distribution of these income gains has been notably unequal. A study conducted by the University of Mannheim underscores that the top 10% of national income distributions have disproportionately benefited from this trend.

The researchers set out to examine how globalization over the last half-century has impacted income inequalities on a global scale. Their findings reveal that while globalization has exacerbated income disparities within many nations, it has concurrently narrowed the gap between countries.

Haves and have-nots

Specifically, countries more deeply integrated into the global economy, such as China, Russia, and certain Eastern European nations, have witnessed a widening chasm between the affluent and the less privileged. Nonetheless, the disparities between nations have diminished in significance within the broader context of global inequality.

“The influence of globalization on income inequalities worldwide was greater than we had expected,” the researchers explain. “We were particularly surprised that these differences were mainly due to the gains of the richest and that the lower income groups benefited little or not at all.”

In their examination of economic globalization, the authors employed an innovative empirical approach. They amalgamated data spanning the last five decades on trade, financial flows, and regulatory policies. This comprehensive dataset was then juxtaposed with the varying rates and regional focal points of economic liberalization measures across individual countries.

The study further highlights that during its initial and middle phases, globalization spurred substantial income growth within individual countries. However, as globalization deepened, the growth effects began to wane.

“The benefits of globalization become smaller during the integration process, while the costs of distribution become higher,” the researchers conclude. “This matches the increasing skepticism towards globalization which can be observed in countries with a high level of economic integration.”