Distributional and Poverty Consequences of Globalization: Are OIC Countries Different?

This study examines the impact of globalization on cross-country inequality and poverty using a new comparable panel data for Organisation of Islamic Cooperation (OIC) and non-OIC developing countries over a long period, 1970–2008. The major findings of the study are that, first, a non-monotonic relationship between income distribution and level of economic development holds in both samples of countries. However, this relationship is comparatively stronger in the case of non-OIC countries. Second, globalization causes adverse consequences on income inequalities in OIC countries while it does not exert adverse effects in non-OIC countries. Third, in the poverty model, openness to trade accentuates not ameliorates poverty in both sets of countries, while FDI affects only the poor of the non-OIC countries. Fourth, financial liberalization exerts a negative and significant influence on income distribution in OIC countries only. Fifth, inflation distorts income distribution and poverty in both sets of countries. Finally, the role of government is robustly significant in reducing inequalities and poverty in non-OIC countries, while the role of government is insignificant in the OIC world. The overall results of this study show that globalization exerts adverse distributional and poverty consequences and, comparatively, OIC countries suffer more from the adverse consequences of globalization. This study concludes that OIC countries are different from non-OIC countries in terms of their exposure with globalization. © Author