Economics and Finance Faculty Publications and Presentations
Document Type
Article
Publication Date
9-2016
Abstract
We reexamine in this paper the role of globalization on top income shares (five classes from top 0.1% to top 10% of the income distribution) for a sample of 15 economies over the period 1970–2004. We investigate financial globalization measures that complement trade openness. Our system GMM (SGMM) estimations allow for a robust treatment of the endogeneity between income concentration and GDP per capita (as well as with taxation or government size). We find two interesting new results. First, the financial integration measure based on portfolio equity and FDI stocks (GEQ) turns out to have a large impact on top income shares, suggesting that the channel through which globalization affects income concentration is through FDI/equity flows. Second, we find strong support for the progressivity of taxation: there is an almost one to one negative effect of higher tax on top income (top 0.1%), which declines monotonically until the top 10% class.
Recommended Citation
Cabral, René, Rocío García-Díaz, and André Varella Mollick. “Does Globalization Affect Top Income Inequality?” Journal of Policy Modeling 38, no. 5 (September 1, 2016): 916–40. https://doi.org/10.1016/j.jpolmod.2016.05.001.
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
First Page
916
Last Page
940
Publication Title
Journal of Policy Modeling
DOI
10.1016/j.jpolmod.2016.05.001
Comments
© 2016 The Society for Policy Modeling. Original published version available at https://doi.org/10.1016/j.jpolmod.2016.05.001