Paper Information

Journal:   SOCIAL WELFARE   SPRING 2010 , Volume 10 , Number 36; Page(s) 237 To 254.
 
Paper: 

THE EFFECT OF GLOBALIZATION ON INCOME DISTRIBUTION IN IRAN: THE TEST OF KUZNETS, STOPPER – SAMUELSSON AND MUNDEL HYPOTHESES

 
 
Author(s):  NAZARI M.*, FATORECHI Z.
 
* FACULTY OF MANAGEMENT, TEHRAN UNIVERSITY, TEHRAN, IRAN
 
Abstract: 

Objective: This paper studies the relationship between globalization and inequality in Iran. In our model inequality is considered to be a function of GNP, GNP2 , (X+M)/GDP and FDI/GDP. Globalization has very important between academic subject that growth in recent years. Globalization change industry, financial, culture and many relationships in the world. It’s very similar to revolution. Some theorisian believes that effects of globalization are too large compare industrial revolution.
Method: We use regression method on data of Iran for rural, urban and total area. Estimate the model using time series data for 1386-1349 period in Iran have been undertaken. Source data, is Central Bank of Iran and use Eviews software and is estimated using OLS. In total, nine equation is estimated that all of them independent variables, areFDI / GDP, GNP and (X + M) / GDP.
Dependent variable in the equation varies. Gini coefficient index, tile ratio and share of ten percent of high income to low income, at urban areas, rural and total areas. Estimated equation is as follows: Gini= A + b (percapitaGNP) + c (percapitaGNP) 2 + d (openness ratio) + e (FDI inflow) +
e share of ten percent high income to low income = A + b ( percapita GNP) + c ( percapita GNP) 2 + d (openness ratio) + e (FDI inflow) +  e Findings: The estimate of regression shows, in Iran with increases of GNP, inequality first increase, and then decrease. When openness rise, inequality in urban and total decrease, but has not effect on rural area. Increase FDI in Iran has not effect on income distribution in Iran.
Results: The results indicate that GNP have a positive and significant relation with Inequality and GNP2 have a negative and significant relation with Inequality. Thus Kuznets hypothesis is accepted. (X+M)/GDP has a negative and significant relation with Inequality, therefore stolper – Samuelson hypothesises is accepted (FDI) / GDP has a positive and no significant relation with Inequality, therefore mundel hypothesis is rejected. Degree of openness and increasing the volume of commercial trade with other countries to reduce inequality. Because comparative advantage in exporting goods that people with low incomes, they must produce. Traditional agricultural exports at low-income areas and by low-income people that increasing the volume of international trade, increased demand and increased demand for these goods will lead to increases of income for lowincome people. Considering that the amount of FDI is negligible in most of industries except oil industry and large industries. There is significant positive correlation between FDI and inequality. In other words, in Mundl hypothesis is not confirmed. Increasing the volume of FDI in the whole country, increases income inequality (Gini coefficient and share of ten percent of high income to low income). Using the three indicators in rural and urban areas the relationship between FDI and income inequality can not be seen. Suggest, future research will use other indicators of poverty and estimate its realation with index of globalization. Also other researchers can use other indicators for globalization, for example combined index of globalization.

 
Keyword(s): GINA KUZNETS COEFFICIENT, GLOBALIZATION, INEQUALITY, MUNDEL, OPENNESS, STOLPER - SAMUELSSON
 
References: 
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