Globalization and the American Income Gap: Assessing the Impact of Liberal Economics and Immigration on Inequality

While enjoying the most rapid economic growth of all large industrialized nations, inequalities in the distribution of income have grown faster in the United States than in most developed nations since the late 1960s. Previous empirical analysis studying the effects of increasing globalization on income inequality defined “economic globalization” as international trade and capital flows. By excluding international labor flows from the definition of economic globalization, previous studies ignored an essential factor of production and assessed the effects of globalization on income disparities inaccurately. This study assesses the impact of increasing international integration on the American income gap through an empirical examination of trade, capital and labor mobility. The research relies on ordinary least squares regression to test the relationship between the three major modes of neoliberal economic integration—trade, foreign direct investment, portfolio investment—and international labor mobility—authorized and unauthorized immigration—on an income inequality ratio for the years 1980 to 2005. By expanding the definition of economic globalization to include international labor mobility, this work contributes to the literature on income inequality by extending the debate into the area of demographic change and the measurement of the unauthorized population in the United States.