Globalization and Inequality - Trinity College Dublin

summary measures of globalization and inequality across countries is a hazardous enterprise: results
are likely to be sensitive to the countries chosen and the openness indicator used. In this light, the
fact that the cross-country regressions surveyed above have thus far failed to yield robust
correlations should come as no surprise.
Second, the 19 th century evidence indicates that globalization was positively associated with
between-country convergence, although the fact that the general world environment is liberal does
not ensure that poorer countries will catch up with the rich: for whatever reason, Iberia remained
relatively isolated from international factor markets during this period, and paid the price. The late
20 th century evidence is, as yet, inconclusive. If globalization is indeed associated with convergence,
then why did both the late 19 th and late 20 th centuries experience so much between-country
divergence (at least until the 1980s)? The answer, presumably, is superior technological progress in
richer countries: globalization was not the culprit. Lucas (2000) describes how divergence might
coincide with globalization, in the context of a simple general model. The model assumes that
countries randomly leave behind a pre-industrial past and embark on modern industrial growth, with
the probability that this occurs depending on world income; and that when they do embark on such
growth, they catch up on the economic leaders. The latter phenomenon may, as Lucas suggests, be
due to the diffusion of resources or ideas across borders (and, by implication, be positively related
to international economic integration). The model predicts a world-wide Kuznets curve, and the
recent papers surveyed above suggest that while we were on the upward slope of the curve until
recently, we may now have reached the turning point, and be experiencing convergence.
Third, there are many respects in which we simply do not know enough about these two
phenomena, and the relationship between them. First, we do not have the commodity price data
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