The Effects of Globalization and Democratization on Inequality in South Korea

Abstract

How has economic globalization influenced the level of inequality in South Korea? How has democratization of South Korea affected its income distribution? Despite a surge of research on the impact of globalization on income inequality in South Korea, there is no systematic empirical analysis that examines how globalization and democratization together influence the country's distribution of income. This article extends previous work by investigating the effects of both economic openness and democracy on South Korea's income inequality. The estimates suggest that the exclusion of either variable can lead to incorrect conclusions regarding the determinants of income distribution. Using data from 1975 to 2015 and 3SLS estimation to account for endogeneity, I find that democracy helps improve inequality, trade has does not affect inequality, and foreign direct investments worsen inequality.