Globalization,decentralization and income inequality: The case of China |
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Institution: | 1. School of Finance and Business, Shanghai Normal University, Shanghai 200234, China;2. School of Urban and Regional Science, Institute of Finance and Economics Research, Shanghai University of Finance and Economics, Shanghai 200433, China;3. Center for Think Tank Studies, Shanghai Academy of Social Sciences, Shanghai 200020, China |
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Abstract: | The current study examines the effect of trade liberalization and expansion of foreign direct investment inflows, together with the pursuit of decentralization, on China's income inequality between 1985 and 2007. As the degrees of integration of the concerned variables are revealed to be different,Stock and Watson (1993) dynamic ordinary least squares method is employed to reveal the cointegrating relationship. The empirical evidence shows that trade liberalization has led to the higher income inequality, discrediting the Stolper–Samuelson theorem in international trade. There is mixed evidence relating to the effect of FDI inflows on income inequality. Decentralization is shown not to influence it. |
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