GLOBALIZATION AND THE GREAT U-TURN: INCOME INEQUALITY TRENDS IN 16 OECD COUNTRIES by

The recent resurgence of income inequality in some of the advanced industrial societies has spawned a wide-ranging debate as to the impact on inequality of an increasingly integrated world economy, typified by growing capital mobility, heightened competition in international markets, and a swelling of migration flows. This study represents one of the first systematic, cross-national examinations of the role of globalization in the "U-Turn" on inequality. We use an unbalanced data set that combines multiple observations on income inequality in 16 OECD nations across the 1967-1992 period (N = 187) and generalized linear model techniques to estimate regression models assuming country-specific random effects (REM). Results indicate that somewhat different sets of independent variables affect total variation in income inequality (i.e., across countries and over time) and variation over time within countries. Total inequality variation is principally affected by the percentage of the labor force in agriculture (+), followed by the institutional factors union density (-) and de-commodification (-), and only then by aspects of globalization including Southern import penetration (+) and direct investment outflow (+). On the other hand, longitudinal variation in inequality, while still dominated by the percentage of the labor force in agriculture (+), is also principally affected by Southern import penetration (+) and direct investment outflow (+), and to a lesser extent by the net migration rate (+). In other words, globalization explains the longitudinal trend of increasing inequality that took place within many industrial countries better than it does cross-sectional inequality differences among countries. We also find significant effects on inequality of wage setting coordination (-), secondary school enrollment (-), and female labor force participation (+). GLOBALIZATION AND THE GREAT U-TURN: INCOME INEQUALITY TRENDS IN 16 OECD COUNTRIES The recent resurgence of income inequality in a number of the advanced industrial societies has spawned a wide-ranging debate as to the causes. A recurring theme has been the impact on inequality of an increasingly integrated world economy, typified by growing capital mobility, heightened competition in international markets, and a swelling flow of immigrants in some countries. Yet, while a lively debate rages outside of the discipline regarding the impact of trade on inequality (e.g., Krugman and Lawrence 1993; OECD 1994; Wood 1994; Burtless 1995; Cline 1997) and the labor market consequences of immigration (Borjas, Freeman, and Katz 1992; Borjas 1994), sociologists have largely been silent on these issues (Morris and Western 1999). Likewise, while there exists a sizable sociological literature devoted to assessing the effects of direct investment on income distribution in developing societies (e.g., Bornschier, Chase-Dunn, and Rubinson 1978; Evans and Timberlake 1980; Bornschier and Chase-Dunn 1985; Firebaugh 1992, 1996; Dixon and Boswell 1996), sociologists have devoted almost no attention to the distributional consequences of international capital flows for the advanced industrial societies. In this paper, we address these omissions in prior research and examine the link between globalization and the recent inequality experience of the OECD countries. In what follows, we first introduce the inequality data set that is employed in this paper and discuss recent inequality trends in advanced industrial societies. The role of globalization in income inequality is discussed next. The model of income inequality developed by Nielsen (1994) and elaborated in Nielsen and Alderson (1995, 1997) is introduced to provide a background against which to test hypotheses regarding the distributional consequences of globalization. Finally, we discuss the results of a pooled time-series of cross-sections analysis of income inequality in 16 OECD nations from 1967-1992.