Neoliberal Globalization, Natural Resource Dependency, and Income Inequality: Are They Related? A Longitudinal Study of Developing Countries (1980-2010)

Contrary to predominant neoliberal ideology that argued higher economic growth rates would eventually lead to better results in terms of income distribution, the last three decades witnessed high economic growth rates accompanied by rising income inequalities in most countries worldwide. Neoliberal globalization manifested itself in increased foreign direct investment, trade openness, and financialization facilitated by huge technological advancements, which greatly transformed and impacted world economies, particularly those in the developing world. Further, abundance of natural resources in some developing countries had severe implications on their economic growth and subsequent income inequality levels. This research examines the effects of neoliberal globalization, natural resource dependency, state-institutional factors alongside with the internal development model on income inequality in a set of 96 developing countries for the period 1980-2010.;Models for Prais-Winsten regressions with panel corrected standard errors show that the internal development model is crucial in determining countries' income inequality levels, in particular agriculture's share of gross domestic product and population growth rates. Further, foreign direct investment, financialization, and technological advancements are all positively associated with increasing income inequalities while trade exhibits a negative association. Natural resource dependency is also highly positively associated with increasing inequalities. Finally, government effectiveness in terms of government expenditure and institutional quality are inversely related with income inequality reflecting the important roles these entities play in mitigating income disparities.;More detailed analyses of specific geographical regions and countries with similar income levels reveal the following. First, the effect of increased access to secondary education has conflicting outcomes depending on both geographical regions and income levels. Second, foreign direct investment is positively associated with increasing income inequalities in all parts of the world except for the Middle East and North African region, where it is inversely related to income inequality. This finding exemplifies the importance of exploring how different types of FDI and natural resources might affect income inequality levels rather than their sheer magnitude sheer magnitude. Third, mineral-rich countries fare worse than their hydrocarbon-rich counterparts in terms of inequality levels. Future research needs to take into account these differences by being more context-specific as well as investigating how different types of foreign investment and natural resources might impact income inequality levels.