Abstract

The impact of globalization on income inequality within countries has been debated for decades in theoretical and empirical studies without producing a consensus. Building on a newly emerging trend of the empirical globalization literature, this article takes a unique approach in terms of examining how income inequality changed within countries after having experienced either an episode of significant globalization or an episode of significant marginalization. Another novelty is using the most comprehensive data on income inequality from the World Income Inequality Database. Based on the experience of 166 countries and territories from 1980 to 2018 (i.e., excluding the COVID-19 episode), our results show that countries that experienced episodes of significant marginalization (i.e., sharp declines in their exports-to-GDP (gross domestic product) ratios relative to the world trend) experienced an increase in income inequality in the subsequent three-year period. Although episodes of significant globalization (i.e., sharp increases in their exports-to-GDP ratios relative to the world trend) are also correlated with an increase in income inequality in the subsequent three years, the results are not statistically significant.