Christopher Chase-Dunn Anthony Roberts University of California-Riverside

The ubiquitous growth of national income inequality in most areas of the world since the 1980s has challenged established theories of income inequality. Specifically, in the extant literature on income inequality, researchers have identified processes of economic development, globalization, and labor market institutions as the primary factors determining the distribution of national income. However, few studies have considered how these processes are interrelated and whether this interaction explains the recent growth in national income inequality. The main purpose of this dissertation is to empirically test a new integrative theory of income inequality based on the concept of the 'embedded economy' - the interaction of market and social forces. This integrative theory posits that growing income inequality is the consequence of changes to national labor regulations and norms, which are being reshaped by the emergence of global manufacturing and international institutions. The dissertation aims to assess three hypotheses using panel data on eighty developing and developed countries observed over a twenty-five year period (1985-2010) and structural equation models with random and fixed-effects. First, using an internationally-comparable measure of labor market institutionalization based on the coding of national labor legislation and country reports on labor violations, the dissertation will test whether labor market institutionalization reduces income inequality. Second, the dissertation will assess whether integration in global production networks, participation in economic intergovernmental organization, and the campaigning of international non-governmental organizations hinders or promotes the formation of labor market institutions in developing countries while inducing a neoliberal reform of labor market institutions in developed countries. Finally, the dissertation will assess whether these processes indirectly affects income inequality through their effects on labor regulations and norms. The intellectual merit of the dissertation is based on three theoretical and empirical contributions to the broad literature on income equality. First, the dissertation will develop a new theoretical approach for explaining income inequality which accounts for the interaction between labor markets, institutions, and globalization. Second, the dissertation will produce new longitudinal data on labor regulations and practices for a large cross-section of countries. Finally, the dissertation advances the methodological approach to studying cross-national variation in income inequality by employing multi-level structural equation models for estimating both proximate and distal effects.

Broader Impact Over the last ten years, income inequality has become a major social issue for governments in developing and developed countries. Findings from the proposed research could have several important implications for policy-making. First, by examining the effects of national labor legislation on income inequality, the dissertation will provide specific evidence on the effectiveness of labor market reforms and social insurance policies for reducing inequality. Second, the findings could elucidate how economic and political globalization have impacted the capabilities of national policy-makers in enacting economic policy aimed creating social equity, which provides insight on how to implement new social policies and reforms in an increasingly global world. Given the growing concern over income inequality, the dissertation will equip policy-makers with helpful information for addressing issues of social inequality.

Project Report

The goal of the research project is to better understand the role of national labor policy in alleviating income inequality caused by international trade and investment. In this research, I use quantitative data from national governments, international organizations, and academic researchers and complex statistical modeling to study whether international trade and investment competition causes greater income inequality by pressuring national governments and firms into reforming national labor policies and practices in developed and less-developed countries. This research should elucidate the complex relationship between international economic competition, social policy, and income inequality among developed and less-developed nations. Moreover, findings from the research should aid policymakers in designing legislation to create a more equitable society in a globalizing world. Preliminary findings from the project show the enforcement of labor laws is critical for reducing income inequality in less-developed countries. However, the growth of subcontracting production, where firms in less-developed countries produce goods for export to more developed countries, incentivizes the non-enforcement of collective labor laws. As a consequences, workers in these countries are unable to create unions, collectively bargain with employers, or threaten management with strikes and work stoppages. Thus, its imperative that policymakers in these countries ensure that collective labor rights are enforced in order to reduce growing income inequality. Additional findings show unions and collective bargaining practices are effective in reducing income inequality in developed countries. However, the intensification of international trade and investment competition among developed and less-developed countries pressures states in more developed countries to enact policies that are designed to reduce unionization, employment protection from dismissal, and collective bargaining. A major consequence of this reform is the growth of national income inequality among more developed countries. Overall, the research project highlights the importance of national labor policy in alleviating economic inequality and the need to maintain progressive labor policy during a period of intense global economic competition.

National Science Foundation (NSF)
Division of Social and Economic Sciences (SES)
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kevin leicht
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University of California Riverside
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