Globalization, Technical Progress, and Income Inequality - Evidence from Korea

This paper tests whether globalization or technical progress caused deterioration of income inequality in Korea during the period 1982-2010. The former comprises international trade and FDI inflows and the latter is expressed by the number of patents. The small sample cointegration test shows that there is mixed evidence on the long run equilibrium relationship among the variables concerned. The OLS and the error correction model estimation results show that neither international trade nor FDI inflows cause changes in income inequality. Meanwhile, technical progress is revealed to cause changes in income inequality.