DP2865 Globalization and Inequality: Historical Trends
?This Paper surveys trends in both international economic integration and inequality over the past 150 years,
as well as the links between them. In doing so, it distinguishes between (a) the different dimensions of
globalization; and (b) between-country and within-country inequality. Theory suggests that globalization will
have very different implications for within-country inequality, depending on the dimension of globalization
involved (e.g. trade versus factor flows), on the country concerned, and on the distribution of endowments;
the historical record provides ample evidence of this ambiguous relationship.
Late 19th century globalization had large effects on within-country income distribution, but the effect on
inequality differed greatly across countries: both trade and migration (but not capital flows) made the rich
New World more unequal, and the (less rich) Old World more equal. The evidence on the links between
within-country inequality and globalization in the late 20th century is mixed. The balance of evidence
suggests that globalization has been a force for between-country convergence in both the late 19th and late
20th centuries; long run patterns of divergence are due to other factors (e.g. the unequal spread of the
Industrial Revolution).
