Globalization and income inequality: Implications for intellectual property rights

This paper examines the impact of globalization on income inequality for a cross-section of 62 developing countries over a period of 17 years (1985-2001). The results of the study indicate that globalization explains only 15% of the variance in income inequality. More specifically, the results show that (1) strengthening intellectual property rights and openness are positively correlated with income inequality; (2) foreign direct investment is negative and significantly correlated with income inequality but this is not robust to different model specifications; (3) the institutional infrastructure is negatively correlated with income inequality. The study's findings and the review of the literature suggest that globalization has both costs and benefits and that the opportunity for economic gains can be best realized within an environment that supports and promotes sound and credible government institutions, education and technological development.