Globalization, Inequality and the Rich Countries of the G-20: Evidence from the Luxembourg Income Study (LIS)

Abstract

The purpose of this study is to summarize and comment upon what we know about the determinants of both the level and trend in economic inequality over the past two decades, and to relate these findings to the progress of globalization in these nations. While the fruits of economic progress in rich nations have not been equally spread, we argue that most citizens in rich Organization for Economic Cooperation and Development (OECD) nations have benefited from the trend toward global economic progress. We begin with a summary of the differences in overall economic inequality within the G-20 nations based on LIS (Luxembourg Income Study) data and recent work by others. Here we find that social policies, wage distributions, time worked, social and labor market institutions and demographic differences all have some influence on why there are large differences in inequality among rich nations at any point in time. In contrast, trade policy has not been shown to have any major impact on economic inequality.