Globalization and Inequality - Trinity College Dublin

especially since Slaughter (2001) finds no relationship between trade liberalization and convergence,
using a more sophisticated difference-in-differences analysis. 10
Moreover, the dimension of globalization which had the greatest impact on convergence
one hundred years ago was not trade, but labour flows; political reality suggests that mass
intercontinental migration will not be allowed to play the same role in the future. Capital flows and
technological transfers, operating through trade or FDI (e.g. Coe and Helpman 1995; Keller 2001),
will have to take up the slack. Work by Alan Taylor on Latin America (e.g. Taylor 2000) suggests
that capital flows can have a major impact on peripheral economies, where policy allows these to
take place; unfortunately, late 20 th century capital markets do not seem to have done as good a job
at channelling savings towards DCs as their late 19 th century counterparts. Ensuring that DCs
benefit from these flows will be crucial in ensuring convergence in the future.
Conclusion
What have we learned thus far?
First, globalization can have an important impact on within-country income distribution, and
did during the late 19 th century. However, for the reasons outlined at the start of the paper, the
relationship between globalization and inequality will vary depending on the country being
considered, the dimension of globalization involved, and the distribution of endowments. The late
19 th century experience illustrates these points very clearly, and there is no reason to suppose that
things are different in the 20 th century. It follows that searching for average relationships between
10
Furthermore, Rodríguez and Rodrik (2001) have cast doubt on the Sachs-Warner
dummy variable; while it is always possible that countries which pursued open policies shared some
other characteristic which made them more likely to converge on the core.
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