Globalisation and Income Distribution: Exploring the Linkages between Trade and Income Inequality

Abstract

Purpose: This review research paper aims to comprehensively analyze the intricate relationship between globalization, particularly international trade, and income distribution across various economies. By synthesizing existing literature, this study seeks to illuminate the nuanced linkages between globalization and income inequality, providing valuable insights for policymakers, economists, and researchers. Theoretical Framework: Drawing upon established economic theories, including the Stolper-Samuelson theorem, the Heckscher-Ohlin model, and various extensions, this paper constructs a comprehensive theoretical framework. This framework serves as the basis for analyzing the multifaceted dynamics between trade, globalization, and income inequality, incorporating factors such as skill-based technological change, labour market dynamics, and institutional variations. Design/Methodology/Approach: This research adopts a systematic and rigorous approach to review a wide range of scholarly works, including empirical studies, theoretical models, and policy analyses. By employing systematic literature review methods, the paper provides a structured analysis of the existing body of research, highlighting key findings and methodological approaches employed in prior studies. Findings: The review synthesizes empirical evidence and theoretical insights to uncover the complex relationships between globalization through trade and income distribution. Findings suggest that the impact of globalization on income inequality is context-specific, influenced by factors such as skill levels, labour market flexibility, and government policies. While some regions may experience reduced income inequality due to globalization, others may witness an exacerbation of income disparities. Research, Practical & Social Implications: This paper offers crucial implications for future research, as it identifies areas where further investigation is warranted. Moreover, policymakers can draw on these findings to design more effective trade and labour market policies, aiming for equitable income distribution. Socially, a better understanding of these linkages can contribute to informed public discourse on globalization's consequences and foster more inclusive economic growth. Originality/Value: This review research paper provides original value by synthesizing and critically evaluating a wide range of empirical studies and theoretical frameworks on the topic. By elucidating the contextual nuances of the relationship between globalization and income distribution, it offers valuable insights that can guide future research and inform policy decisions.