Globalization and Income Inequality: New Evidences and Mechanisms from China
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| Title | Globalization and Income Inequality: New Evidences and Mechanisms from China
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| Author | Zheng Xinye, Zhang Yangyang, Ma Ben and Zhang Li |
| Organization | Renmin University of China;Central University of Finance and Economics |
| Email | zhengxinye@ruc.edu.cn；yangyangdream@126.com;mbruc@163.com；yangyangdream@126.com |
| Key Words | Local Governments' Behavior; FDI; Labor Standards; Environmental Standards; Income Inequality |
| Abstract | From the perspective of the local governments' behavior, this paper aims to explore the impact and transmission mechanism of globalization on China's income inequality. We force on how foreign direct investment (FDI) affects income inequality through labor standards and environmental standards implemented by local governments. To test our main hypotheses, we use data of 31 provinces between 2004 and 2014. Empirical findings indicate that FDI-inflows exert a significant negative impact on income inequality in China in the process of globalization. Nearly a half of the total impact of FDI on income inequality is achieved indirectly through the two channels, i.e. labor standard and environmental standards. We find that FDI-inflows lowers the local standards and environmental standards implemented by local governments. These indirect effects can partly explain the negative effect of FDI-inflows on income inequality in China. Thus, in order to avoid the negative impact of FDI on the income distribution, it is an important option for local government to tighten regulations of labor standards and environmental standards. |
| Serial Number | WP1299 |
| Time | 2018-10-18 |
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