Globalisation and Income Inequality: Evidence from Urban China

Nurshila  Ahmad; Mohd Fahmi  Ghazali; Ricky Chia  Chee Jiun

This paper examines the impact of financial globalisation and trade globalisation on income inequality using the Chinese urban household. It formally tests whether the effect of financial globalisation and trade globalisation on income varied at different levels in urban China between 1990 and 2017. Methodologically, it departs from the existing literature by exploiting quantile regression analysis. This methodological approach allows the testing of globalisation’s impact on income at different levels. The overall quantile regression results clearly reveal that the effects of various factors on urban household income are heterogeneous, depending on the income level. In the case of financial globalisation, the coefficients are positively and statistically significant at the usual level at all quantiles. However, a closer observation reveals that the magnitude of the impacts on income is heterogeneous. More specifically, at high levels of income (i.e., the 85th quantile), financial globalisation has a high impact on income compared to its impacts at low-income levels (i.e., the 20th quantile). This suggests that financial globalisation has improved the income of the rich more rapidly than that of the poor, mean financial globalisation would widen income gap within urban China.

Ahmad, N. (2021). Heterogenous Impact Of Globalisation On Income Inequality In Turkey . Labuan Bulletin of International Business and Finance (LBIBF), 19(1), 72–84. https://doi.org/10.51200/lbibf.v19i1.3034
Amin, S. (1974). Accumulation and development: a theoretical model. Review of African Political Economy, 1(1), 9–26. https://doi.org/10.1080/03056247408703234
Balan, F., Torun, M., & Kilic, C. (2015). Globalization and Income Inequality in G7: A Bootstrap Panel Granger Causality Analysis. International Journal of Economics and Finance. https://doi.org/10.5539/ijef.v7n10p192
Barrett, R. E., & Whyte, M. K. (1982). Dependency Theory and Taiwan: Analysis of a Deviant Case. American Journal of Sociology. https://doi.org/10.1086/227555
Bergh, A., & Nilsson, T. (2010). Do liberalization and globalization increase income inequality? European Journal of Political Economy, 26(4), 488–505. https://doi.org/10.1016/j.ejpoleco.2010.03.002
Bergh, A., & Nilsson, T. (2010). Do liberalization and globalization increase income inequality? European Journal of Political Economy, 26(4), 488–505. https://doi.org/10.1016/j.ejpoleco.2010.03.002
Braunstein, E., & Brenner, M. (2007). Foreign direct investment and gendered wages in urban China. Feminist Economics, 13(3-4), 213-237.
Cabral, R., García-Díaz, R., & Mollick, A. V. (2016). Does globalization affect top income inequality? Journal of Policy Modeling, 38(5), 916–940. https://doi.org/10.1016/j.jpolmod.2016.05.001
Carter, J. R. (2007). An Empirical Note on Economic Freedom and Income Inequality. Public Choice, 130(1/2), 163–177. http://www.jstor.org/stable/27698048
Chen, Z., & Lu, M. (2016). Globalization and Regional Income Inequality in China. In Toward Balanced Growth with Economic Agglomeration (pp. 63–87). Springer Berlin Heidelberg. https://doi.org/10.1007/978-3-662-47412-9_4
Chen, C. (2016). The impact of foreign direct investment on urban-rural income inequality Evidence from China. China Agricultural Economic Review. https://doi.org/10.1108/CAER-09-2015-0124
Chen, Z., & Lu, M. (2016). Globalization and Regional Income Inequality in China. In Toward Balanced Growth with Economic Agglomeration. https://doi.org/10.1007/978-3-662-47412-9_4
Cornia, G. A. (2003). The Impact of Liberalisation and Globalisation on Within-country Income Inequality. CESifo Economic Studies, 49(4), 581–616. https://doi.org/10.1093/cesifo/49.4.581
Dreher, A., & Gaston, N. (2008). Has globalization increased inequality? Review of International Economics, 16(3): 516-536. https://doi.org/10.1111/j.1467-9396.2008.00743.x
Dos Santos, T. (1970) Dependencia economica y cambio revolucionario en America Latina. Caracas: Editorial Nueva Izquierda.
Ezcurra, R., & Rodriguez-Pose, A. (2013). Does Economic Globalization affect Regional Inequality? A Cross-country Analysis. World Development, 52, 92–103. https://doi.org/10.1016/j.worlddev.2013.07.002
Farrell, K. (2017). The Rapid Urban Growth Triad: A New Conceptual Framework for Examining the Urban Transition in Developing Countries. Sustainability, 9(8), 1407. https://doi.org/10.3390/su9081407
Ferraro, V. (2008). Dependency Theory: An introduction, in the development Economics reader, ed Giorgio secondi, London; Routledge, pp. 58-64.ISBN: 9780415771566
Frank, A. G. (1969). Latin America: Underdevelopment or Revolution. New York: Monthly Review Press.
Gustafsson, B., & Wan, H. (2020). Wage growth and inequality in urban China: 1988–2013. China Economic Review, 62, 101462. https://doi.org/10.1016/j.chieco.2020.101462
Han, J., Liu, R., & Zhang, J. (2012). Globalization and wage inequality: Evidence from urban China. Journal of International Economics, 87(2), 288–297. https://doi.org/10.1016/j.jinteco.2011.12.006
Hamnett, C. (2020). Is Chinese urbanisation unique? Urban Studies. https://doi.org/10.1177/0042098019890810
He, S., & Qian, J. (2017). From an emerging market to a multifaceted urban society: Urban China studies. Urban Studies, 54(4), 827–846. https://doi.org/10.1177/0042098016675826
Heshmati, A. (2005). The relationship between income inequality, poverty, and globalization. World Institute for Development Economics Research, United Nations University, Research paper, No. 2005/37.
Hossain, M. S. (2016). Foreign Direct Investment, Economic Freedom and Economic Growth: Evidence from Developing Countries. International Journal of Economics and Finance. https://doi.org/10.5539/ijef.v8n11p200
Huang, J., Cai, X., Huang, S., Tian, S., & Lei, H. (2019). Technological factors and total factor productivity in China: Evidence based on a panel threshold model. China Economic Review, 54, 271–285. https://doi.org/10.1016/j.chieco.2018.12.001
Jalil, A. (2012). Modeling income inequality and openness in the framework of Kuznets curve: New evidence from China. Economic Modelling, 29(2), 309–315. https://doi.org/10.1016/j.econmod.2011.10.012
Koenker, R., and Basset, G. W. (1978). Regression quantiles.Econometrica, Vol. 46, issue 1, 33-50. https://doi.org/10.2307/1913643
Koenker, R., & Bassett, G. (1982). Robust Tests for Heteroscedasticity Based on Regression Quantiles. Econometrica, 50(1), 43. https://doi.org/10.2307/1912528
Kuznets, S. (2019). Economic Growth and Income Inequality. In The Gap between Rich and Poor (pp. 25–37). Routledge. https://doi.org/10.4324/9780429311208-4
Le, T.-H., Nguyen, C. P., Su, T. D., & Tran-Nam, B. (2020). The Kuznets curve for export diversification and income inequality: Evidence from a global sample. Economic Analysis and Policy, 65, 21–39. https://doi.org/10.1016/j.eap.2019.11.004
Lee, W. C., Cheong, T. S., Wu, Y., & Wu, J. (2019). The Impacts of Financial Development, Urbanization, and Globalization on Income Inequality: A Regression-based Decomposition Approach. Asian Economic Papers, 18(2), 126–141. https://doi.org/10.1162/asep_a_00703
Liang, Z. (2006). Financial development and income distribution: a system GMM panel analysis with application to urban China. Journal of economic development, 31(2), 1.
Li, S., & Sato, H. (Eds.). (2006). Unemployment, inequality and poverty in urban China (p. 327). New York: Routledge.
Lim, G. C., & McNelis, P. D. (2016). Income growth and inequality: The threshold effects of trade and financial openness. Economic Modelling.58, 403-412. https://doi.org/10.1016/j.econmod.2016.05.010
Marks, G. N. (2009). Modernization Theory and Changes Over Time in the Reproduction of Socioeconomic Inequalities in Australia. Social Forces, 88(2), 917–944. https://doi.org/10.1353/sof.0.0274
Mills, M. (2008). Globalization and Inequality. European Sociological Review, 25(1), 1–8. https://doi.org/10.1093/esr/jcn046
Munir, K., & Bukhari, M. (2020). Impact of globalization on income inequality in Asian emerging economies. International Journal of Sociology and Social Policy. https://doi.org/10.1108/IJSSP-08-2019-0167
Paweenawat, S. W., & McNown, R. (2014). The determinants of income inequality in Thailand: A synthetic cohort analysis. Journal of Asian Economics. 31-32,10-21. https://doi.org/10.1016/j.asieco.2014.02.001
Pradhan, R. P. (2009). Casual nexus between globalization and income inequality; An empirical study in China. Banking & Finance Letters.
Prechel, H. (1985). The Effects of Exports, Public Debt, and Development on Income Inequality. The Sociological Quarterly, 26(2), 213–234. https://doi.org/10.1111/j.1533-8525.1985.tb00225.x
Qiu, L., & Zhao, D. (2019). Urban inclusiveness and income inequality in China. Regional Science and Urban Economics, 74, 57–64. https://doi.org/10.1016/j.regsciurbeco.2018.11.006
Rostow, W. W. (1973). Politics and the Stages of Growth. Verfassung in Recht Und Übersee, 6(1), 117–120. https://doi.org/10.5771/0506-7286-1973-1-117
Sau, R. (1978). Unequal exchange, Imperialism and Underdevelopment. Calcutta: Oxford University Press.
Shu, X., Zhu, Y., & Zhang, Z. (2007). Global economy and gender inequalities: The case of the urban Chinese labor market. Social Science Quarterly. https://doi.org/10.1111/j.1540-6237.2007.00504.x
Sicular, T., Ximing, Y., Gustafsson, B., & Shi, L. (2007). The Urban?Rural Income Gap And Inequality In China. Review of Income and Wealth, 53(1), 93–126. https://doi.org/10.1111/j.1475-4991.2007.00219.x
Trindade d’Ávila Magalhães, D. (2018). The globaliser dragon: how is China changing economic globalisation? Third World Quarterly, 39(9), 1727–1749. https://doi.org/10.1080/01436597.2018.1432352
Wan, G., Lu, M., & Chen, Z. (2007). GLOBALIZATION AND REGIONAL INCOME INEQUALITY: EMPIRICAL EVIDENCE FROM WITHIN CHINA. Review of Income and Wealth, 53(1), 35–59. https://doi.org/10.1111/j.1475-4991.2007.00217.x
Wang, D. T., Gu, F. F., Tse, D. K., & Yim, C. K. B. (2013). When does FDI matter? The roles of local institutions and ethnic origins of FDI. International Business Review, 22(2), 450–465. https://doi.org/10.1016/j.ibusrev.2012.06.003
Weede, E. (1980). Beyond Misspecification in Sociological Analyses of Income Inequality. American Sociological Review, 45(3), 497. https://doi.org/10.2307/2095180
Wu, F. (2001). China’s recent urban development in the process of land and housing marketisation and economic globalisation. Habitat International, 25(3), 273–289. https://doi.org/10.1016/S0197-3975(00)00034-5
Zhang, X., & Kevin, H. Z. (2003) How Does Globalisation Affect Regional Inequality within A Developing Country? Evidence from China, Journal of Development Studies, 39:4, 47-67, DOI: 10.1080/713869425
Zhu, C., & Wan, G. (2012). Rising Inequality in China and the Move to a Balanced Economy. China and World Economy. https://doi.org/10.1111/j.1749-124X.2012.01274.x
Zhou, Y., & Song, L. (2016). Income inequality in China: causes and policy responses. In China Economic Journal. https://doi.org/10.1080/17538963.2016.1168203
Zhu, C., & Wan, G. (2012). Rising Inequality in China and the Move to a Balanced Economy. China and World Economy. https://doi.org/10.1111/j.1749-124X.2012.01274.x

In-Text Citation: (Ahmad et al., 2023)
To Cite this Article: Ahmad, N., Ghazali, M. F., & Jiun, R. C. C. (2023). Globalisation and Income Inequality: Evidence from Urban China. International Journal of Academic Research in Economics and Management and Sciences, 12(2), 38 – 49.

Copyright: © 2023 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode

International Journal of Academic Research in Economics and Management Sciences

Open Access Journal

Globalisation and Income Inequality: Evidence from Urban China

Nurshila Ahmad, Mohd Fahmi Ghazali, Ricky Chia Chee Jiun

Further Information

Our Journals

Get intouch with us