Globalization, Trade, and Inequality in the Digital Era: A Panel Data Analysis of Wealth Distribution

The study analyses the impact of different aspects of globalization on income inequality in a group of 18 countries during the years 2004 to 2023. The Gini coefficient is used to show income inequality, while there are four important measures for globalization: The values we look at are exports as a percentage of our GDP, imports as a percentage of our GDP, foreign direct investment, and the KOF Globalization Index. Fixed‐effects panel regression is applied to adjust for the unobserved, unchanging characteristics of different countries so that we can concentrate on the effect of yearly globalization changes on inequality within those countries. The analysis shows that things are not always clear-cut. First of all, higher FDI is linked to a rise in the Gini coefficient but only a little, suggesting that these investments tend to help owners of capital or skilled people and widen the income divide. Additionally, when countries have higher scores on globalization, there tend to be lower levels of income inequality, suggesting that more global participation gives access to a better range of opportunities for many groups. In addition, neither exports nor imports have a strong effect on GDP when other country‐specific elements are taken into account. This shows that boosting trade alone does not change the income balance unless domestic measures are also put in place.

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