Analysis of Export Diversification and Impact of Globalisation on Income Inequality: Evidence from Asian Countries

ABSTRACT

Due to the importance of product and geographical diversification of exports, the gravity equation was used to predict export diversification for 19 Asian countries from 2004 to 2017 and the System Generalised Method of Moments was used to analyse the dynamic impact of globalisation at the disaggregated level of the diversification of sectoral exports and the goods specialisation on income inequalities. The results show that sectoral diversification of exports is the driving force of inequality. Furthermore, increased diversification of exports in the highly-income countries of Asia increases inequality and has little impact on low-income countries in Asia.

KEYWORDS:

• Diversification
• generalised method of moments
• income inequality
• gravity equation
• globalisation

JEL CLASSIFICATION:

• F14
• J31
• F15
• F13

Disclosure Statement

No potential conflict of interest was reported by the author(s).

Notes

1 Indonesia, Malaysia, Philippines, Singapore, Thailand. Brunei Darussalam, Vietnam, Laos and Myanmar, and Cambodia.

2 Afghanistan (excluded in the analysis), Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka.

3 Bangladesh, Bhutan, Cambodia, India, Indonesia, Lao PDR, Nepal, Pakistan, Philippines, Sri Lanka, and Vietnam.