Determinants of global income inequality: concerns and evidence about the neoliberal paradigm

This paper analyses the main drivers of global income inequality while testing some of the most relevant economic theories on inequality evolution. We run xed e ects regressions on four di erent income inequality measures, using a panel of 157 countries, for the period 1960-2015. We nd evidence that, while labor market reforms and unemployment were two upturning drivers of inequality, governments have an important rebalancing role, despite their decreased size. Furthermore, al- though social and political globalization reduced inequality, overall globalization and the widening of nancial systems increased inequality. These ndings suggest that the 1980s transition from post-war regulated capitalism to neoliberal capitalism led to a worldwide upsurge of inequality within countries. The e ect of liberalization on inequality is con rmed when we perform a causal analysis using the European Eastern Bloc transition of the 1990s as a quasi-experiment