Globalization And Income Inequality

In 2001,China became a member of the World Trade organization.Critisms are that although openness has a positive impact on economic growth and export growth,the equality of income distribution has been worsened.With two microeconomic datasets CHIP and CHNS,I examined the impact of globalization on income inequality empirically.The measure I used to capture income inequality is intergenerational income mobility.I test the hypothesis with difference-in-differences methodology.I reached pieces of results on levels and trends of intergenerational income mobility in China.Regression results show that the intergenerational income elasticity in China is approximately 0.2,which is way lower than that in the US and the UK.After joining the WTO,coastal provinces experienced larger improvements in intergenerational income mobility compared to inland provinces.While widely used DID methodology would employ a treatment variable,this paper further tests the theory with data from National Bureau of Statistics.Results using trade volume,export volume,trade growth,export growth,and export share in GDP are consistent with those using simple treatment variable.Before WTO accession,coastal areas with more active trade activities experienced lower intergenerational mobility.Post WTO accession,coastal areas experienced higher mobility improvement.Overall,WTO accession improved mobility.