How Do the Technology Transfer and Trade Openness Affect Income inequality: A Panel Data Analysis?

Abstract

This study examines the impact of trade openness on the income inequality in the developing and developed countries. Additionally, we see if technology transfer and changes in the ratio of skilled to unskilled labor and educational attainment have any role in influencing the income inequality. We used panel data for 104 countries from both developed and developing countries during 1980-2014. We estimated the relationship using fixed effects and random effects panel regression analysis as well as system GMM technique for robustness check. We find that trade openness, expenditure on education and ratio of the skilled to unskilled labor significantly reduce inequality in both developed and developing countries. Increase in technology transfer and role of religion in politics significantly reduces inequality in the developing countries only whereas corruption increases income inequality in the developing countries only.