JWSR-v8n1-Special Issue on Global Inquality - Part I 30 The Resilience of Dependency Effects in Explaining Income Inequality in the Global Economy: A Cross- National Analysis, 1975–1995 Linda Beer Terry Boswell Linda Beer Department of Sociology Emory University 1555 Pierce Dr. Atlanta, GA 30322 lbeer@emory.edu Terry Boswell Department of Sociology Emory University 1555 Pierce Dr. Atlanta, GA 30322 tbos@emory.edu journal of world-systems research, viii, 1, winter 2002, 30-59 Special Issue on Global Inequality – Part I http://jwsr.ucr.edu issn 1076–156x © 2002 Linda Beer and Terry Boswell I N T RODUC TION The contemporary era is one of both accelerated economic globalization and rising inequality. International markets for goods, services, and capital have become increasingly integrated and since the 1980s this trend has shown a sharply upward curve (Rodrick 1997; Brady and Wallace 2000). Economic inequality has increased during this time period as well, whether measured between individuals, between nations, or within nations (Berry et al. 1983; Ram 1992; Korezeniwicz and Moran 1997). Milanovic (1999) estimates that the world Gini index for the richest to the poorest income groups increased one percent per year between 1988 and 1993, (from .63 to .66), while the World Development Report fi nds that GDP per capita in the richest 20 countries has grown to 37 times that of the poorest 20 nations, a gap that has doubled in the past 40 years (2000/01). Th ere is an increasing awareness among both academic scholars and devel- opment professionals that globalization puts certain populations at risk (Rodrick 1997; Birdsall 1999; UNCTAD 2000). Th is contrasts with the “Washington Consensus” among global elites that emphasized trade and investment liberaliza- tion is the panacea for development problems in the 1980s and early 1990s. Th e key turning point was the impoverishment left behind by the East Asian cur-Th e contemporary era is one of both accelerated economic globalization and rising inequality. Th ere is an increasing awareness among both academic scholars and develop- ment professionals that globalization puts certain populations at risk. However, there has been inadequate theoretical analysis and a lack of up to date empirical studies that explain just how contemporary globalization aff ects inequality and the well being of indi- viduals. Th is study explores the conditions under which TNC penetration and other globalization processes infl uence change in domestic income distribution. Its aim is to investigate whether theoretical models that have proven successful in explaining diff er- ences in income inequality cross-sectionally also allow for an understanding of the dynam- ics of income distribution during the 1980s and early 1990s, an era characterized by a dra- matic acceleration of globalization. We pres- ent an analysis of change in national income distribution using linear regression models with a panel design. Th is study suggests that dependence on foreign investment as a development strategy, especially compared to domestic and human capital investment, may be misguided for nations concerned with equality. Net of other factors, foreign invest- ment dependence benefi ts the elite segments of the income-earning population over the poorer eighty percent. Our analysis provides evidence of a shift in capital/labor relations brought about by globalization that has sig- nifi cantly contributed to the rise in income inequality seen throughout the world. abstract http://www.emory.edu/SOC/ (case sensitive) mailto:lbeer@emory.edu mailto:tbos@emory.edu http://www.emory.edu/SOC/ http://jwsr.ucr.edu Linda Beer and Terry Boswell31 The Resilience of Dependency 32 rency crisis of 1997 and subsequent meltdowns from Russia to Brazil, which pro- duced earnest calls, often by the same elites, to take heed of the ways in which globalization has had unequal eff ects among the world’s population, both within and between nations. And since the agenda-setting success of the “Battle of Seattle,” ‘globalization’ has become the unifi er of diverse grass-root social move- ments in a string of large-scale protests when the WTO, IMF, or other global policy makers try to meet. Inequality is back on the global agenda, according to the World Bank’s World Development Report (2000/01). However, there has been inadequate theoretical analysis and a lack of up to date empirical studies that explain just how contemporary globalization aff ects inequality and the well being of individuals (Paus and Robinson 1997). To examine the eff ects of globalization on inequality, we start with world- system theory, which emphasizes the developmental consequences of global rela- tions between unequally powerful nations, in particular, relations of dependency. Since the 1970s, much of this work has been concerned with the eff ects of accu- mulated investment from transnational corporations (TNCs) in the developing world, or periphery.1 Specifi cally, studies of ‘capital dependency’ or TNC ‘pen- etration’ contend that disproportionate control over host economies by transna- tional corporations increases inequality by altering the development patterns of these nations. Although the vast majority of FDI is located within developed nations, the impact of FDI on a developing nation’s economy is much more sig- nifi cant (WIR 2000). Th erefore, world-system scholars focus on accumulated stocks of foreign investment as a share of the host nations GDP. Th is focus is in sharp contrast with most globalization studies. While glo- balization has multiple economic, political, and cultural facets, when studying inequality most have focused on the eff ects of international trade, neglecting the signifi cance of foreign ownership (Rodrick 1997; Ferreira and Litchfi eld 1998; Lachler 1998; WDR 2000/01). Similarly, with some important exceptions (i.e. Tsai 1995; Dixon and Boswell 1996), most recent cross-national studies of income inequality have moved away from examining global forces like foreign direct investment (FDI) focusing instead, on economic and socio-cultural dual- ism (Williamson 1991; Nielsen and Alderson 1995) or technoecological heritage (Lenski and Nolan 1985; Crenshaw and Ameen 1994). Th is is surprising for two reasons. First, dependency arguments concerning the impact of FDI on inequality have received relatively robust empirical support, warranting further examination.2 Second, foreign direct investment has dramatically increased in importance over the past two decades, and is currently the primary source of resource fl ows to developing nations (Froot 1993; Tsai 1995). In 1988, FDI sur- passed all other forms of lending as a source of foreign capital to developing nations (WDR 1991). In 1982, the total value of global inward FDI stock stood at almost 6 billion (US$), by 1990 that fi gure had reached 1.7 trillion (US$), and by 1999 it had reached 4.7 trillion (WIR 2000). Th e ratio of world FDI stock to world GDP increased from 5 in 1980 to 16 in 2000 (WIR 2000). Indeed, LDCs are encouraged to attract foreign investment as the primary route to economic growth and well being in the contemporary world-economy. Foreign investment is promoted by development agencies such as the World Bank and the International Monetary Fund as an effi cient way to add to exist- ing domestic pools of capital, technology and entrepreneurial talent (McMichael 1996; Rothgeb 1996; WIR 1991). Implicit in the logic of investment liberalization is the idea that the free fl ow of unregulated capital is the best means to national development (Ranney 1998). It has only been recently that traditional develop- ment agencies have begun to realize that FDI may disadvantage certain groups of individuals and that it is incumbent upon policymakers to safeguard vulnerable populations (UNCTAD 2000). Th is study is an attempt to explore the conditions under which TNC pen- etration and other global factors infl uence change in domestic income distri- bution. Its aim is to investigate whether theoretical models that have proven successful in explaining diff erences in income inequality cross-sectionally also allow for an understanding of the dynamics of income distribution during the 1980s and early 1990s, an era characterized by a dramatic acceleration of global- ization. Due to a prior lack of high quality time-series income inequality data, most cross-national studies of income distribution have employed regression models with a cross-sectional design. It is clear that the lack of time-series and longitudinal analyses covering many countries is a signifi cant gap in the literature concerning cross-national income inequality. Moreover, examining changes in inequality over the short-term has both theoretical and empirical benefi ts, allow- ing for an analysis of the impact of contemporary globalization on inequality and for an evaluation of the sometimes-contradictory fi ndings of prior research. 1. See, for instance, Chase-Dunn 1975; Bornschier 1981; Rubinson 1976; Bornschier and Ballmer-Cao 1979; Dolan and Tomlin 1980; Evans and Timberlake 1980; Sullivan 1983; Bornschier and Chase-Dunn 1985; Dixon and Boswell 1996; Beer 1999. 2. Some seem to conclude that the insignifi cance of core/periphery dummy variables invalidates any world-system approach, even though such indicators are the crudest pos- sible measures (i.e. Muller 1988). Linda Beer and Terry Boswell33 The Resilience of Dependency 34 dencies are exacerbated by the development strategies most developing nations pursue. Prechel discusses the implications of these strategies for increasing income inequality, arguing that export-oriented production is usually foreign- owned or fi nanced. Th is leaves these economies vulnerable to fl uctuations in the world market, which along with the factors already discussed, contributes to maintenance of high levels of income inequality. Th e subordinate position of peripheral governments vis-a-vis core capital and prominent transnational actors such as the IMF, decrease their ability to implement autonomous social and eco- nomic policies (McMichael 1996). Other discussions of trade dependency focus on the character of a nation’s participation in the global trading system. Commodity concentration refers to the degree to which a nation’s export role is limited to the production of only a few commodities. In comparison, nations with a more diversifi ed array of exports have more options in responding to fl uctuations in the world economy, for exam- ple being able to better weather downturns in the global commodity market. Commodity concentration has been found to have negative eff ects on physical quality of life (Ragin and Bradshaw 1992). While size of the export sector has been found to be associated with inequal- ity, other dependency measures such as commodity concentration and debt ser- vice have not been found to be signifi cantly related to income inequality (Weede and Tiefenbach 1981; Prechel 1985; Chan 1989). However, dependency scholars stress the dynamic nature of global capitalism, and how the changing character of capitalist exchange on a global scale is coupled with alterations in the nature of the relations of dependency among the participants. Many of these research- ers argue that, for the past twenty to thirty years, cross-national capital transfers are more indicative of dependency than are trade-based measures (Prechel 1985; Chan 1989). Th e third wave of the literature, which is our main emphasis, focuses on foreign investment as the primary means through which the modern capitalist world-system creates and maintains intra- and international socioeconomic inequities. Numerous empirical studies have confi rmed a signifi cant association between foreign corporate penetration and inequality (Evans and Timberlake 1980; Kohli et al. 1984; Bornschier and Chase-Dunn 1985; Chan 1989; London and Robinson 1989; Crenshaw and Ameen 1994; Dixon and Boswell 1996; Beer 1999; Alderson and Nielsen 1999). Others have found foreign penetration eff ects only in certain geographical regions (Rothgeb 1989; Tsai 1995). Even those studies that fail to confi rm this relationship generally report their conclusions with res- ervation and do not dismiss foreign corporate penetration as a potentially impor- tant determinant of income inequality (Weede and Tiefenbach 1981; Crenshaw 1992). Th is paper presents an analysis of change in national income distribution using linear regression models with a panel design. Th e data set contains inequality data for 65 nations at two points in time, circa 1980 and 1995. Before presenting our empirical models, we provide a summary of the literature and a discussion of our data and methods. T H EOR ETICA L PE R SPE C T I V E S ON C ROS SNATIONA L I NCOM E I N EQUA LI T Y Th ere are three main world-system arguments concerning the global sources of domestic income inequality, which follow something of a rough temporal pat- tern. Th e fi rst focuses on inequalities arising from the concentration of land ownership that are a legacy of colonialism, and later through corporate agricul- ture, that generates severe income inequality (Furtado 1970; Muller and Seligson 1987; Boswell and Dixon 1990). Many cross-national studies have found a posi- tive association between land inequality and inequitable distribution of income (Simpson 1993; Crenshaw 1993; Crenshaw and Ameen 1994). In the examination of the relationship between growth and inequality, some researchers have found that land redistribution prior to the onset of economic expansion is a crucial intervening variable (Bowman 1997; Deininger and Squire 1997). Th e second emphasizes the export structure of developing nations. Trade between industrial and industrializing countries creates dependent patterns of unequal exchange, leading to high levels of income inequality within the develop- ing world (Baran 1957; Frank 1967; Galtung 1971). Export-oriented production for the world market creates sector dualism in which the primarily foreign- owned export segment of the economy monopolizes internal capital and repa- triates profi ts, stagnating the domestic sector. Th e empirical evidence indicates that large export sectors are positively related to income inequality (Stack 1980; Prechel 1985). Th e considerably more capital-intensive nature of export produc- tion results in higher returns to capitalists at one end and the underemployment of the indigenous labor force at the other. Moreover, wages are depressed by lim- ited labor force mobility between sectors due to lack of skill transferability, low education levels, and various social and legal barriers (Amin 1976; Prechel 1985). Prechel (1985) argues that the productive capacities and structure of the export and traditional economic sectors of developing nations are linked, not simply temporarily disarticulated. Th e growth of the fi rst depends on the stagna- tion of the latter. Furthermore, creation of a high-wage high-profi t oligopolistic capitalist sector not only creates a minority of high-income employees; it further increases inequality by encouraging urban migration and increased competition for unskilled jobs (Evans and Timberlake 1980). Competition in crowded urban areas reduces wages by decreasing the bargaining power of labor. Th ese ten- Linda Beer and Terry Boswell35 The Resilience of Dependency 36 Th ree main mechanisms are hypothesized to link capital dependency and social inequality (Crenshaw and Ameen 1994). First, foreign investment in devel- oping countries generates large sectoral disparities. Th e sector dualism in this case is between the foreign and domestic sectors. Th e former includes a dispro- portionate share of the export sector in developing countries, but is not limited to it. Compared to the domestic sector, higher capital intensity and lower utiliza- tion of indigenous labor polarizes income distributions. Second, transnational corporations operating in developing nations accrue a disproportionate share of local sources of credit and repatriate a portion of profi ts rather than reinvesting them in the local economy. Most importantly, compared to domestic capital, they do not facilitate near as many links to local businesses and may even displace small and medium business suppliers, profes- sionals, and retailers who fuel the entrepreneurial and professional middle class. Th e lack of linkages between sectors is the prime diff erence between FDI in the periphery and in the core, where linkages are common and foreign investment has a large multiplier eff ect on local business. Finally, the governments of these nations, motivated by the necessity of attracting and maintaining highly mobile foreign investment, implement poli- cies and strategies that decrease the bargaining power of labor and inhibit verti- cal mobility by the lower classes, while enhancing the mobility and training of the managerial and TNC technical elite. Th ese include tax concessions, guaran- tees of profi t repatriation, and labor laws unfavorable to workers (London and Robinson 1989; O’Hearn 1989). Engineers or MBAs with degrees from the US or EU expect pay and living conditions similar to their core peers, but one major reason a TNC locates in the periphery is for low cost labor. While globalization is designed to ever increase the mobility of capitalists to seek higher returns across borders, workers face decidedly nationalist laws that criminalize their behavior. More recent work along this line emphasizes the decreased autonomy of peripheral national governments to the workings of the global economy and emerging transnational actors. Scholars argue that nations that are highly depen- dent on foreign capital and encumbered by enormous debt are subordinated to TNCs and multilateral development agencies such as the IMF and the World Bank (McMichael 1996). Th ese global actors infl uence economic and social policies both directly (by tying loan restructuring to the implementation of structural adjustment policies) and indirectly (by creating a competitive envi- ronment among developing nations for foreign investment that depresses wages and encourages lowered labor and environmental standards). DeMartino (1998) asserts that the increased mobility of capital weakens the ability of developing nations to tax capital and provide social insurance for workers. Liberalized investment rules undermine national policies that encourage employment and wage enhancement such as targeted job training, priority hiring and local pur- chasing requirements (Ranney 1998). Alternative Theories of Cross-National Income Inequality Th e “classic” modernization argument is based on the work of Simon Kuznets (1955, 1963, 1976) who found a curvilinear association between income inequality and economic growth, and was among the fi rst to develop a theoretical argument to explain this fi nding. Modernization theorists argue that wealth con- centrates in the hands of a few entrepreneurs in the early stages of industrializa- tion, as this is the most effi cient use of scarce capital. Increasing the rate of capital investment, both foreign and domestic, depends on the development of modern economic segments of the economy. Inequality eventually decreases, however, as modern values and technology diff uses through out the economy. Recent research seeks to explain inequality by reference to dualism between modern (industrial) and traditional (agricultural) sectors, which harkens back to modernization theory (Paukert 1973; Cheney and Syrquin 1975; Ahluwalia 1976; Kuznets 1976). It is not development per se, but dualism and diff usion processes that are the keys to explaining income inequality (Nielsen and Alderson 1995).3 Dualism is also found in dependency arguments (Prechel 1985), diff ering in the type of sectors and in the predictions of readily increasing sector integration by diff usion alone due to structural constraints that prevent the lessening of inequality. Nielsen (1994) argues that two transitional processes explain part of the eff ect of development on income distribution: sector dualism and general- ized sociocultural dualism. Sector dualism is primarily economic and is associ- ated with labor force shifts from the low productivity low-wage traditional sector to the high productivity high-wage modern sector. He argues that the movement of labor from one sector to another increases income inequality as an automatic numerical consequence, regardless of the level of income inequality within the various sectors. Th is notion of sector dualism is drawn from the work of Kuznets (1955) and Lecaillon et al. (1984) and is both the process by which sectoral labor force shifts produce income inequality and the amount of inequality due to dif- ferences in income between traditional and modern economic sectors of develop- 3. Nielsen and Alderson (1999) are hard to classify. Th eir rhetoric is quite critical of world-system theory, while their actual empirical fi ndings confi rm penetration eff ects previously found in similar models. Linda Beer and Terry Boswell37 The Resilience of Dependency 38 ing nations. Th at is, it is a function of both the diff erences in average incomes between sectors as well as the relative size of the sectors. Urbanization and inter- nal migration are related to these processes, and indicators such as percent of labor force in agriculture have been found to be associated with income inequal- ity at lower levels of development (Crenshaw 1992, 1993; Simpson 1993; Nielsen and Alderson 1997). Direct measures of sector dualism, the Gini coeffi cients for the diff erence between agricultural shares of the labor force and its share of the total income of society, have also been found to be positively associated with inequality (Nielsen 1994; Nielsen and Alderson 1995). Generalized sociocultural dualism is associated with the demographic tran- sition, which is the increased growth rate of newly developing populations (due to reductions in the death rate through the diff usion of medical technology) that is not yet off set by a reduction in the birth rate. As a consequence, societies experiencing the transition have a high natural rate of population growth that increases income inequality through its impact on labor surplus, decreasing the relative bargaining power of low-skilled workers. Nielsen (1994) argues that any variable associated with development that generates heterogeneity due to par- tial or selective diff usion will contribute to inequality. Generalized sociocultural dualism entails all of the dimensions of industrialism that spread unevenly and therefore aff ect the distribution of income, including the diff usion of education and political democracy, which have been traditionally explained by other schol- ars from a diff erent perspective. Another often-debated topic among development scholars is access to edu- cation. Some theorists argue that education allows for the attainment of creden- tials and skills necessary for employment in the modern industrial sectors of the economy (Simpson 1990; Crenshaw 1992). Th is argument is derived from the modernization perspective in that the relationship is dependent on national eco- nomic growth and increasing internal sectoral complexity. Educational institu- tions in the early stages of economic growth are assumed to be concentrated in urban areas and primarily accessed by elites. As industrialization continues, how- ever, mandatory and open educational policies are instituted nationally, allowing for educational attainment and hence increased employment opportunities for the rest of the population. Th is occurs through a process of diff usion of institu- tional forms and practices from urban to rural areas and is also a result of the growth of eff ective popular demand generated by improving economic condi- tions. Some researchers have confi rmed this inverted-U relationship between edu- cational enrollments and income inequality (Simpson 1990; Crenshaw 1992). Others have found negative eff ects on income inequality (Weede 1993; Nielsen 1994). Still others agree that the spread of education is curvilinear related to income inequality, but assert that the relationship is U-shaped (Crenshaw and Ameen 1994). Th ese scholars argue that along with the spread of educational credentials associated with development come increased competition for those positions requiring credentials, therefore reducing wage diff erentials between the educated and uneducated and decreasing income inequality (Nielsen and Alderson 1997). At a certain point of institutionalization, however, a new set of post-industrial social inequalities is established and the relationship becomes increasingly positive (Crenshaw and Ameen 1994).4 We will consider a variety of other specifi c arguments below when explaining the independent variables. But for now, let us turn to the variables and methods. DATA A N D M ET HODS The Measurement of Income Inequality Many researchers have recognized problems with the data quality and comparability of cross-national measures of income inequality (e.g. Ahluwalia 1993[1974]; Muller 1993[1984]; Hoover 1989). Fortunately, data collection proce- dures have improved substantially in recent years and much work has been done in assessing their comparability. Our primary source for the inequality data is a World Bank data set constructed by Deininger and Squire (hereafter referred to as “DS”) (1996). In order to increase our sample size as much as possible we sup- plement the DS data with two other high quality sources: the ILO’s “Statistics on Poverty and Income Distribution” (ILO) (1996) and the World Development Indicators 1999 (WDI) (1999). All three data sets were compiled from various sources, but with careful attention to issues of quality and comparability. Th e DS data set has proven extremely useful in preliminary analyses (Deininger and Squire 1996, 1997). As many of the theoretical explanations of inequality contain a temporal element, lack of high quality time-series data has hampered empirical testing of these hypotheses. Indeed, Deininger and Squire argue that the use of inferior data calls into question the results of many studies, especially those examining changes in inequality over time (1996: 570, 573). Th ey 4. Even when empirical fi ndings do not diff er, often-divergent theoretical explana- tions are off ered. For example, Crenshaw (1992, 1993, 1994) and Simpson (1990, 1993) engage in a debate as to whether the eff ects of such factors as the diff usion of education and the spread of political democracy are primarily political or economic phenomena. Th is is in large part a theoretical, rather the empirical, debate. Linda Beer and Terry Boswell39 The Resilience of Dependency 40 impose stringent quality standards in the construction of their high-quality data set. Each observation must meet three requirements: 1) household or individual as the unit of observation, 2) comprehensive coverage of the population, and 3) comprehensive coverage of income or expenditure. Th e researchers argue that their data set improves upon those used previously in three ways: it contains a larger number of high caliber observations, includes a greater number of nations and provides a more reliable basis for time-series analysis. In terms of the issues discussed by Deininger and Squire that may aff ect comparison of measures of inequality, we take the following steps. Where pos- sible we attempt to use observations where the income recipient unit is the household rather than the individual, as household-based measures yield lower estimates of inequality. Similarly, we selected measures where income is reported net of taxes where possible, as these tend to generate more equally distributed estimates of fractile income shares. As previously mentioned, we supplement the DS data with ILO and WDI data sets. Th e data contained in each frequently overlaps and is quite similar. In terms of preference, we selected measures based on the income earning population fi rst, then on the economically active popula- tion, and then on tax records. Based on the fi ndings of previous studies, however, we do not expect any systematic bias based on diff erences in measurement in these areas (Deininger and Squire 1996; Alderson and Nielsen 1999).5 Using this methodology we constructed a panel data set for the years 1980-1995. Th e population consists of all nations with a population of over one million for which data was available. Th e result is a data set of 65 nations for which we have inequality data at two points in time. Th e measurement year of the earlier estimate ranges from 1968 to 1986 (mean of 1979), and the range for the later estimate is from 1988 to 1995 (mean of 1991). Th e 65 cases average a 11.5 year lag between inequality measures, ranging from 3 years to 21 years.6 Because income data is frequently collected in quintile shares, the two most commonly used measures in comparative studies of income inequality are the Gini coeffi cient, which looks at the disparity between equal and actual distribu- tion of income among quintile shares, and the concentration of income received by the top 20 of the population. Th e majority of cross-national studies fi nd no diff erence between models based on top quintile income concentration and those based on the Gini (although the Gini coeffi cient has been extensively critiqued on methodological and theoretical fronts Chan 1989; Hoover 1989; Braun 1991; Muller 1993[1984]). It is, however, for theoretical reasons that researchers should opt to use income concentration or the Gini coeffi cient. Muller (1993[1984]) argues that world-system theory points to the concen- tration of income at the upper end of the distribution as the crucial indicator of income inequality. As there is little variation in the bottom 20, the diff erence between concentration in the top percentiles and the Gini score is due almost entirely to the distribution in the middle. As Deininger and Squire (1996) note, when examining changes in inequality the use of an aggregate measure such as the Gini coeffi cient obscures the character of shifts in income distribution because “…there is no unique mapping between the changes in the index and the underlying income distribution…” (p. 567). Th at is, the Gini coeffi cient for a particular nation may increase, but there is no way of discerning whether the rise in inequality is due to redistribution from the bottom quintile to the top or a result of a shift from the middle to the top. Also of theoretical importance is that the use of upper proportional shares of income indirectly measures asset inequality, another signifi cant dimension of economic stratifi cation (Boswell and Dixon 1993). Considering these theoretical concerns, in the analyses that follow we concentrate on examining change in top quintile income share. The dynamics of income inequality, 1980-1995 Th e data suggest that, overall; inequality as measured by top quintile income share has increased within nations during the 1980s and early 1990s.7 On aver- age, the percent of national income accruing to the top twenty percent of the population rose by 2.4. While this may seem rather small, it is important to consider that in real terms this amount is quite substantial, especially in nations where great numbers of people live in poverty. In El Salvador, for example, 2 of national incomes is equal to roughly us$189,756,000. 5. Th e majority of indicators in our data set are based on income, but in the inter- est of expanding coverage we include 19 expenditure measures as well. To address the potential error involved, we follow the steps suggested by Deininger and Squire (1996). For the quintile data, we calculated the mean diff erence in income- and expenditure- based quintile shares and adjusted the expenditure-based data for quintiles where nec- essary in the following way: adding .0168 to the top quintile, subtracting .0008 from the upper middle, subtracting .0039 from the middle, subtracting .0009 from the lower middle, and fi nally subtracting.0115 from the bottom quintile (7 cases in the 1995 data and 12 cases in the 1985 data). 6. Ivoire, where change in inequality is only measured over three years was made in the interest of retaining as many African nations in the data set as possible. 7. Top quintile income share for all nations at both points in time are included in the Appendix. Linda Beer and Terry Boswell41 The Resilience of Dependency 42 In addition, the data indicate that the long held assumption that inequality changes rather slowly over time does not hold for the more recent time period under study. Nearly 30 of the nations in our data set exhibit top quintile changes of +/–10, and 60 show changes of +/–5. Of these nations, the majority experienced worsening income inequality. For example, fourteen nations (22) exhibited increases in top quintile income share of over 10, and twenty- four nations (37) had increases of over 5. An interesting issue is whether the generally held assumption that income inequality is a relatively stable feature was based on fl awed or incomparable data or, alternately, whether this was true for earlier periods but no longer holds in the era of increasing economic globaliza- tion. Th e advanced industrial nations as a whole tend to have lower inequality than other countries, especially the Scandinavian social democratic nations. Th ere was not a tremendous amount of change in inequality among developed countries, with the exception of the “Anglo-American” liberal market nations: Australia (+5), the United States (+6), and the United Kingdom (+8). What is striking is that the latter all began the decade with high inequality rel- ative to other advanced industrial nations, defying any ceiling eff ect on inequal- ity provided by political institutions or global convergence expected by world cultural theorists. Stallings (1995) suggests that all share similarities in their “Anglo-American” variant of capitalism and many studies have documented rising inequality in these nations in recent decades (Bluestone and Harrison 1988; Braun 1991; Nielsen and Alderson 1995, 1997). Measurement of the Independent Variables Th e independent variables we include in our regression models are represen- tative of the theoretical perspectives that address cross-national income inequal- ity discussed in the literature review. Th is will allow the perspectives to compete freely with one another and allow for a fuller specifi cation of the empirical models. Where data is not available for the target year for a substantial number of cases, we use averages over a specifi ed time period in order to retain as many nations as possible in the models. World System Indicators: TNC Penetration: Capital dependence is characterized by signifi cant amounts of foreign control over the national economy, represented by the accumulation of stock owned by transnational corporations. Th e most common operationaliza- tion of investment dependence is transnational corporate penetration (PEN), the ratio between inward foreign direct investment (FDI) stock and GDP. Th is measure has been found to be signifi cantly associated with high levels of inequal- ity in developing nations. Th e WIR provides measures of inward FDI as a per- centage of gross domestic product for multiple years (Source: World Investment Report 1998).8 On average, TNC penetration rose over the decade; nations averaged a 7 pen score in 1980, whereas in 1990 that average had increased to 11. Th e major- ity of nations in the data set showed dramatic increases in foreign accumulation of stock relative to the size of their economies, the average percent increase from 1980 to 1990 was 184. Of the 73 nations for which we have PEN data for both 1980 and 1990, all but 13 (18) increased their PEN scores, many quite substan- tially. Over half of the sample (60.3) increased PEN by over 50. Th e majority of nations actually increased their dependence on foreign ownership by relatively large amounts, 42.5 increasing by more than 100 and 20.6 increasing by more than 200. Exploitation. Following Boswell and Dixon (1993), class exploitation is mea- sured as wages and salaries as a percent of value added in manufacturing [(1 - WSPVA)/WSPVA]. Manufacturing is the only sector for which data is avail- able, but is presumably correlated to other sectors. Th is measure captures the cross-national disparity in bargaining power between capital and labor in deter- mining the returns to increases in productivity due to factors such as diff er- ences in capital mobility, labor laws, social welfare, and so on. In general, the Scandinavian social democratic countries have the lowest rates and the highest are found in Latin America and among heavily indebted countries, including those in Eastern Europe (even while nominally ‘communist’) (Boswell and Dixon 1993). Although rarely used in cross-national studies of inequality, it has been found to be positively associated with income concentration (Boswell and Dixon (1993).9 (Source: World Data 1995) Sectoral disarticulation. Th is measure is meant to capture the underabsorb- tion of labor in the economic sectors of the economy; it refl ects the dispropor- tionality of productivity across sectors. Some have argued that disarticulation may be one of the mechanisms through which TNC penetration aff ects income distribution (Breedlove and Armour 1997). Th is measure is similar to the sector dualism measure, but that measure only captures dualism in agriculture. It is constructed by taking the sum of the diff erences between a sectors share of the 8. See Evans and Timberlake 1980; Kohli 1984; Bornschier and Chase-Dunn 1985; Chan 1989; London and Robinson 1989; Crenshaw and Ameen 1994; Beer 1999. 9. –1986 for Nepal. Linda Beer and Terry Boswell43 The Resilience of Dependency 44 minus agriculture as a percent of GDP, and is expected to have a positive associa- tion with income inequality. (Source: World Development Indicators 1998) Percent of labor force in agriculture. While some have found a large agricul- tural sector to be related to high inequality (Simpson 1993; Crenshaw 1993, 1992), they have not included a sector dualism measure. Nielsen and Alderson (1995) argue that, when controlling for intersectoral diff erences in inequality, a large agricultural sector (having a relatively more equal distribution of income) should exhibit a negative association with the inequality indicators. (Source: World Development Indicators 1998) Natural rate of population increase. Th is measure is operationalized as the crude birth rate minus the crude death rate and is intended to capture the eff ect of the demographic transition and generalized sociocultural dualism on income distribution (Nielsen and Alderson 1995). It is expected to have a positive eff ect on inequality (Ahluwalia 1976; Bollen and Jackman 1985; Simpson 1990; Nielsen 1994). (Source: World Development Indicators 1999) Agricultural population density weighted by the percentage of the labor force in agriculture. Th is variable is constructed as per Crenshaw and Ameen (1994) by fi rst constructing an agricultural density measure (the ratio of the total agricul- tural labor force divided by arable land), and then multiplying this density mea- sure by the labor force in agriculture and taking its square root. Th is variable has generally been found to have a negative eff ect on income inequality (Chan 1989; Crenshaw 1992, 1993; Crenshaw and Ameen 1994), but some have reported insig- nifi cant relationships with some diff erences in measurement (Simpson 1990; Nielsen 1994). (Source: World Development Indicators 1998) A N A NA LYSIS OF C H A NGE I N TOP QU I N TI LE I NCOM E SH A R E , 19 8 0 19 95 Descriptive statistics and a correlation matrix of the variables used in the panel models are presented in Tables 1 and 2. Several variables were logged to correct for skewness: TNC penetration, real GDP per capita, exploitation, agri- cultural density, and average exports as a percent of GDP. As mentioned earlier, income inequality increased in the majority of nations in our sample. On average, top quintile income share rose in the 65 nations for which we have data at two points in time, from 45.51 to 46.80. Also of interest is the increase in average TNC penetration over the decade; nations averaged a 7 PEN score in 1980, whereas in 1990 that average had increased to 11. Th e majority of nations in the data set showed dramatic increases in foreign accumulation of stock relative to the size of their economies, the average percent increase from 1980 to 1990 was 184. Of the 73 nations for which we have PEN data for both 1980 and 1990, all but 13 (18) increased their PEN scores, many quite substantially. Over half of labor force and that sectors contribution to GDP, across all three major sectors of the economy: service, industry and agriculture. (Source: World Development Indicators 1998) Change in urban population. Th is measure is meant to capture “overurbaniza- tion,” the rapid migration of rural workers to the cities. Th is relocation to urban areas is assumed to be a result of the mechanization and transnationalization of the rural sector in developing nations (Prechel 1985). Overurbanization contrib- utes to inequality by increasing the number of unemployed workers and thereby decreasing wages. We operationalize this measure as change in the percent of the population living in urban areas over a fi ve year time period. We use this instead of a measure of percent urban population in order to capture the eff ects of a rapid increase in urban dwellers, rather than the slower trend of rising urbaniza- tion seen throughout the world. (Source: World Development Indicators 1998) Change in service labor force. Evans and Timberlake (1980) argue that inequal- ity is greater within the tertiary sector, even though average incomes are higher in the tertiary as opposed to the agricultural sector. Th is is because incomes are more polarized in the service sector, which contains both professionals and low- skilled workers. Growth in the tertiary sector may also contribute to inequality through its creation of a readily available reserve army of labor, which depresses wages in other sectors through is weakening of labor’s bargaining power. Some have asserted that foreign investment increases the tertiary sector and that change in tertiary sector has a positive eff ect on income inequality (Evans and Timberlake 1980). (Source: World Development Indicators 1998) Alternative Indicators: Level of Development. We use real gross domestic product per capita as a measure of level of economic development. Real dollars are those adjusted for diff erences in domestic prices using purchasing power parities. (Source: Penn World Tables 5.6; World Development Indicators 1999) Education. We operationalize this variable as secondary school enrollments and its inclusion in the models is meant to capture levels of domestic human capital. Nielsen and Alderson (1995) argue that high levels of secondary school enrollments indicate “skills deepening.” Th e nature of this relationship, however, has not been fully settled by the empirical evidence. Some have found education to be negatively related to inequality (Weede 1993; Nielsen 1994; Nielsen and Alderson 1995), others have found an inverted-U shaped pattern (Simpson 1990; Crenshaw 1992) and still others have found a U-shaped association (Crenshaw and Ameen 1994). (Source: World Development Indicators 1997) Modern Sector dualism. As per Nielsen and Alderson (1995), this variable is operationalized as the absolute value of percent of the labor force in agriculture Linda Beer and Terry Boswell45 The Resilience of Dependency 46 the sample (60.3) increased PEN by over 50. Th e majority of nations actually increased their dependence on foreign ownership by relatively large amounts, 42.5 increasing by more than 100 and 20.6 increasing by more than 200. Th e data indicate that the acceleration of global investment is indeed one of the characteristic features of the contemporary era. Regression Analysis of Change in Top Quintile Income Share, 1980–1995 Table Th ree, equation A, replicates Beer’s (2001) model predicting top quintile income share for a cross-section of nations circa 1995.10 In this equa- Table 1 – Panel Models Descriptive Statistics N Minimum Maximum Mean S.D. Top quintile income share (1980) 66 32.10 68.00 45.51 8.60 Top quintile income share (1995) 86 33.80 65.18 46.80 8.56 TNC penetration 74 0.00 0.53 0.07 0.08 Real GDP per capita 83 322.00 15295.00 4416.49 3990.37 Average disarticulation 68 –25.96 8.06 –2.61 4.14 Average sector dualism 70 –1.47 61.31 22.86 17.49 Average agricultural labor force 84 1.20 93.75 42.11 28.57 Natural rate of population increase 84 –1.10 37.80 19.51 10.73 Average secondary school enrollment 78 3.00 105.00 50.35 30.76 Percent change in urban population 85 –2.18 34.12 6.79 6.86 Average exploitation in manufacturing 71 0.46 7.10 2.30 1.43 Percent change in female labor force 83 –12.42 57.79 17.48 12.53 Sources For All Tables: Top quintile income share, circa 1980; Deininger and Squire 1996, ILO 1996, WIR 1999. Top quintile income share, circa 1995; Deininger and Squire 1996, ILO 1996, WIR 1999. TNC penetration, 1980; WIR 1998. Real GDP per capita, 1980; Penn World Tables 5.6. Average disarticulation, 1980–1985; WDI 1998. Average sector dualism, 1980–1985; WDI 1998. Average agricultural labor force, 1980–1985; WDI 1998. Natural rate of population increase, 1980; WDI 1999. Average secondary school enrollments, 1980–1985; WDI 1997. Percent change in urban population, 1980–1985; WDI 1998. Average exploitation in manufacturing, 1980–1985; World Data 1995. Percent change in female labor force, 1980–1990; Wistat 1994. 10. Th is model is drawn from work presented in Beer (2001), an unpublished disserta- tion manuscript. In this context it is used to illustrate the diff erences between lagged cross-sectional and panel models of top quintile income share. tion, income inequality has a positive relationship with economic development, TNC penetration, exploitation, disarticulation, change in urban population, and change in the percent of the labor force in services. Top quintile income share is negatively associated with secondary school enrollments, the exploitation/change in urbanization interaction term, and agricultural density. However, equation B indicates that this model does not work as well when we add the lagged depen- dent variable to the model. Th at is, the set of variables included in equation A are useful in specifying level of income inequality cross-nationally, but are inad- equate if what we wish to understand is change in top quintile income share over the 1980s and early 1990s. Although development, investment dependence, and exploitation are associated with increasing inequality, and education is related to smaller gains in top quintile income share, this set of variables is a poor fi t when specifying change in income distribution. A replication of Nielsen and Alderson’s “dualism” model is presented in equation C. Th ese theorists take issue with modernization arguments, asserting that the cross-national variations in income inequality are not driven by simple increases in GDP per capita, but are instead accounted for by a set of variables that capture the changes in social and economic structure that accompany the movement of nations from agricultural to industrial societies. Th e dualism model has proven useful for cross-sectional analyses of income inequality (Nielsen 1994; Nielsen and Alderson 1995; Alderson and Nielsen 1999). However, as was the case in equation B, when the lagged dependent variable is included in equa- tion D, the model fails to adequately predict top quintile income share change.11 Clearly, the equations presented in Table 3 indicate that models that work well in specifying income distribution for a cross-section of nations do not adequately predict change in inequality. As many of the theories that attempt to account for cross-national variation in income distribution contain a temporal element, it is incumbent upon scholars of cross-national income distribution to test these propositions with the improved data now available. DISC US SION A N D CONC LUSION As noted in the introduction, inequality is back on the agenda for many development agencies. Th is is in part due to the failure of the past few decades to signifi cantly reduce global poverty in an era of increasing liberalization despite robust economic growth (Milanovic 1999). Th e World Bank’s World 11. Th e principal components factor representing the four dualism variables also did not signifi cantly predict change in top quintile income share. Linda Beer and Terry Boswell47 The Resilience of Dependency 48 Table 2 – Correlation Matrix for Panel Models top 20 (1980) top 20 (1995) lpen (1980) lrgdppc (1980) av disart (80–85) av sec dual (80–85) av ag lf (80–85) pop inc (1980) av sec ed (80–85) % ch u pop (80–85) av exploit (80–85) % ch svc (80–90) lag density (1980) top 20 (1980) 1.000 (66) .847** (65) .091 (58) –.391** (66) .162 (53) .568** (55) .434** (63) .700** (63) –.571** (61) .334** (64) .386** (60) .212 (61) .170 (60) top 20 (1995) 1.000 (86) .231* (72) –.329** (81) .171 (66) .384** (68) .294** (82) .603** (82) –.563** (76) .229* (83) .355** (69) .150 (81) .082 (79) lpen (1980) 1.000 (74) .282** (73) –.119 (61) –.250* (62) –.347** (71) –.064 (71) .194 (68) –.340** (72) –.192 (65) –.112 (71) –.377** (70) lrgdppc (1980) 1.000 (83) –.395** (67) –.817** (69) –.939** (80) –.750** (80) .851** (76) –.700** (81) –.474** (71) –.194* (78) –.685** (77) av disart (80–85) 1.000 (68) .380** (67) .412** (68) .331** (67) –.394** (65) .238* (68) .056 (62) –.120 (68) .339** (67) av sec dual (80–85) 1.000 (70) .902** (70) .678** (69) –.791** (67) .614** (70) .308** (63) .224* (67) .633** (69) av ag lf (80–85) 1.000 (84) .705** (83) –.862** (77) .696** (84) .422** (69) .197* (81) .716** (80) pop inc (1980) 1.000 (84) –.807** (77) .481** (84) .453** (69) .135 (81) .440** (79) av sec ed (80–85) 1.000 (77) –.620** (78) –.490** (67) –.228* (75) –.566** (75) % ch u pop (80–85) 1.000 (85) .394** (70) .239* (82) .516** (80) av exploit 1.000 –.045 .450** (80–85) (71) (68) (69) % ch svc 1.000 .064 (80–90) (83) (78) (1980) l ag density 1.000 (81) * significant at the .05 level (1–tailed), ** significant at the .01 level (1–tailed) Key for Table 2: top 20 (1980): top quintile income share, circa 1980; Deininger and Squire 1996, ILO 1996, WIR 1999. top 20 (1995): top quintile income share, circa 1995; Deininger and Squire 1996, ILO 1996, WIR 1999. TNC pen: TNC penetration, 1980; WIR 1998. rgdppc: real GDP per capita, 1980; Penn World Tables 5.6. av disart: average disarticulation, 1980–1985; WDI 1998. av sec dual: average sector dualism, 1980–1985; WDI 1998. pop inc: natural rate of population increase, 1980; WDI 1999. av sec ed: average secondary school enrollments, 1980–1985; WDI 1997. % ch urb pop: percent change in urban population, 1980–1985; WDI 1998. av exploit: average exploitation in manufacturing, 1980–1985; World Data 1995. % ch fem lf: percent change in female labor force, 1980–1990; Wistat 1994. ag density: agricultural population density weighted by the percentage of the labor force in agriculture, 1980; WDI 1998. Linda Beer and Terry Boswell49 The Resilience of Dependency 50 Development Report notes that 2.8 billion of the world’s 6 billion individuals live on less then $2 per day (WDR 2000/01). Although the percent of individu- als living in poverty has declined somewhat, the absolute number of poor people has increased (Chen and Ravaillon 2000). Moreover, global income inequality has rapidly grown in the past few decades (Berry et al. 1983; Korzeniewicz and Moran 1997). Development agency scholars have traditionally stressed economic growth generated through integration with the world economy as the primary route to improving the lives of those in developing nations (see, for example, Dollar and Kray 2000). Now, however, there is an increasing emphasis on growth with equity, as many recent studies have found that the benefi ts of economic growth to the poor are highly dependent on the existing level of inequality within nations (WDR 2000/01; Weisbrot et al. 2000; Wodon 1999). Chen and Ravaillon provide empirical evidence that indicates that inequality is a constraint on pro-poor growth (2000). Th e sense that equitable distribution of income within nations is an important precursor to achieving widespread and benefi cial economic growth is becoming more widespread.’’ Recently, development scholars have begun to explore the ways in which glo- balization puts nations at risk of increasing income inequality (Birdsall 1999). Rodrick argues that the primary challenge for the world economy is “…ensuring that international economic integration does not contribute to domestic social disintegration.” (1997:2). As noted, a gap in most of these recent studies is that they focus on the eff ects of international trade, neglecting the signifi cance of for- eign investment.12 Globalization heightens the vulnerability of certain groups, not only in developing nations but also in advanced market economies (UNCTAD 2000). Th e analysis presented here illustrates the usefulness of panel models in understanding the dynamics of income distribution. As Kohli et al. (1985) points out, while cross-sectional analyses may reveal long-term structural tendencies, panel analyses are essential for uncovering causal forces aff ecting changes in income inequality. As the global economy increases in both rapidity and volume, these changes may have greater consequence. Many scholars have discussed the deindustrialization of core nations during the 1980s, generally focusing on spe- cifi c examples of increasing capital mobility and its eff ects on core labor (Piore and Sabel 1984; Bluestone and Harrison 1988). It is only recently that scholars have begun to look at these phenomena in terms of globalization, at how the Table 3 – Comparison of Lagged Cross-Sectional and Panel Models Predicting Top Quintile Income Share (a) (b) (c) (d) Constant 37.177** (18.308) 1.823 (19.249) 58.424*** (6.234) 25.236*** (7.323) Top quintile income share (1980) 0.721*** (0.145) 0.804*** (0.121) TNC penetration – lagged (1980) 1.658** (0.699) 0.984* (0.609) (80–85) Average exploitation in manufacturing– lagged 7.205*** (1.853) 4.542*** (1.736) Average disarticulation (80–85) 0.902*** (0.330) 0.321 (0.287) Percent change in urban population (80–85) 0.979*** (0.305) 0.213 (0.292) Average exploitation – lagged * Change in urban population –0.729*** (0.234) –0.359* (0.255) Percent change in female labor force (80–90) 0.141** (0.849) 0.013 (0.074) Agricultural density – lagged (1980) 0.105* (0.080) –0.721 (0.909) Real GDP per capita – lagged (1980) 4.155** (1.995) 2.985* (1.800) (80–85) Average secondary school enrollment –0.188*** (0.054) –0.109** (0.909) –0.196*** (0.060) –0.164*** (0.055) Average sector dualism (80–85) 0.257** (0.109) 0.014 (0.118) Average agricultural labor force (80–85) –0.292*** (0.078) –0.129* (0.077) Natural rate of population increase (1980) 0.295** (0.127) –0.094 (0.141) F 8.206*** 13.643*** 14.287*** 27.012*** Adj. R2 .555 .738 .458 .718 N5 3 46 64 52 * p < .10, ** p < .05, *** p < .01 – significance levels are one-tailed 12. One important exception is Brady and Wallace, who found that FDI has a nega- tive impact on the political and economic power of workers in U.S. states (2000). Linda Beer and Terry Boswell51 The Resilience of Dependency 52 bargaining power through unionization and pubic policy would be the broadest and most direct route, but is the most fraught with risk from capital fl ight. Long term success under globalization will require international union organizing and changing the rules of global exchange in the WTO, IMF, and other institutions. Finally, TNC penetration has an impact on income distribution beyond what one would expect based on prior levels of inequality and various domestic factors. Can a country reduce TNC penetration, which increases inequality, without reducing foreign investment, which increases growth? At fi rst, this may seem impossible, as penetration is a factor of FDI. However, one of the main problems of FDI in developing countries is the lack of linkages to domestic businesses. Policies that expand linkages, including ones that make local capital more useful, would multiply domestic growth (and a local middle class) along- side FDI, keeping the degree of penetration in check. Even if penetration were to increase, the negative eff ects would be muted, especially as matched with the policies listed above. Globalization does indeed appear to put nations at risk of increasing inequal- ity (Birdsall 1999). Although some have dismissed the fears of those who have expressed apprehension regarding the eff ects of accelerated globalization on social welfare as “protectionist” or “inward-looking,” the study presented here supports the idea that undue reliance on foreign investment may in fact benefi t elite segments of the population over others. Th e empirical evidence supports the view that globalization puts certain populations at risk (Rodrick 1997). Moreover, the results of the study indicate that this eff ect is not limited to only developing nations. Th e data suggest that those advanced industrial nations with relatively high and increasing levels of foreign investment, such as the United States and the United Kingdom also saw increased inequality over the 1980s and early 1990s. Th at these very nations, along with the majority of global fi nan- cial institutions, vigorously espouse the continuing trend toward liberalization of foreign investment policies and assert that fears of globalization are unwar- ranted is somewhat ironic. Global investment may certainly be likened to a rising tide, and it may be a tide that lifts all boats, but the empirical evidence presented here indicates that it surely lifts some boats higher than others. Th e question of whether indeed foreign investment improves the incomes for all citizens is an empirical question. Th is study suggests that dependence on foreign invest- ment as a development strategy, especially compared to domestic and human capital investment, may be misguided for nations concerned with equality. Net of other factors, foreign investment dependence benefi ts the elite segments of the income-earning population over the poorer eighty percent. global economy is changing the structure of inequality. Th ere are many causes of income inequality and more research should be done that fully explores the con- temporary dynamics of income distribution. Th e research presented here indi- cates a shift in capital/labor relations brought about by globalization that have signifi cantly contributed to the rise in income inequality seen throughout the world. Our current ways of understanding cross-national inequality are inad- equate by themselves in explaining this recent change. Several factors suggested by the world-system approach—TNC penetration and exploitation—appear to tap into this structural change. In addition, some factors associated with alternative theories receive sup- port. Although not curvilinear, development has a positive relationship with income inequality net of the other factors included in the model. While this does not fi t a traditional modernization view of the world, it tells us a great deal about the kind of unfortunate world we live in today. Nielsen and Alderson (1997) have argued that the Kuznets “inverted-U” actually takes the form of a wave if the relatively recent increase in inequality among the wealthy nations is considered. Th e empirical evidence also supports the importance of education for decreasing inequality; the education variable consistently had a robust and highly signifi cant negative association with change in top quintile income share. Nations with high levels of secondary school enrollments appear to experience fewer increases in income concentration, as human capital becomes more widely dispersed. Nielsen and Alderson argue that this variable indicates a “skills deepening,” where the accumulation of various productive skills generates income for greater propor- tions of the population by providing them with the expertise to fi ll more posi- tions, thereby equalizing incomes. Th is suggests that nations with a desire to decrease income inequality within their borders would do well to invest in pro- grams that increase secondary school enrollments. Expanding human capital, especially among women, is the surest way to increase labor’s share of the pro- ductivity gains. What besides increasing education does our research imply will succeed for countries that seek to reduce inequality without sacrifi cing economic develop- ment? Th e world-systems approach suggests that reducing exploitation in man- ufacturing and elsewhere would increase their income share. However, this is tricky as capital reinvested from the capitalist’s share (as opposed to consumed or sent abroad) increases growth and development. As mentioned above, the most productive, although highly limited, route is to expand education and skill training; especially among women and other more easily exploited populations. Related productive steps include banning child labor and sweatshops, guaran- teeing occupational and environmental safety, improving public health and wel- fare and so on, although the cost of these rises for poorer countries. Increasing Linda Beer and Terry Boswell53 The Resilience of Dependency 54 A PPE N DI X C o u n tr y J J J Australia Banglades Belgium Brazil Bulgaria Canada Chile China Colombia Costa Rica Cote d'Ivoire Czechoslovakia Denmark Dominican Republic Egypt El Salvador Ethiopia Finland France Germany Greece Guatemala Honduras Hong Kong Hungary India Indonesia Israel Italy amaica apan ordan Kenya South Korea Malaysia T o p Q u in ti le I n co m e S h ar e (1 9 8 0 ) 44.200 45.320 36.100 61.600 32.930 37.930 51.400 36.660 58.760 51.400 47.430 32.100 37.210 47.800 43.200 53.200 41.300 40.000 41.820 37.420 40.170 53.900 59.500 46.500 32.240 40.900 42.270 39.600 39.050 50.300 39.570 51.000 60.900 45.400 55.800 ye ar 1981 1981 1979 1980 1980 1981 1968 1980 1978 1981 1985 1980 1981 1984 1974 1977 1982 1980 1979 1981 1981 1979 1986 1980 1982 1977 1980 1979 1980 1975 1980 1980 1982 1980 1979 T o p Q u in ti le I n co m e S h ar e (1 9 9 5 ) 46.400 37.900 35.030 65.180 39.247 34.840 63.000 41.650 54.350 50.700 44.080 35.570 37.830 55.700 41.090 54.400 47.700 33.800 40.100 37.100 41.180 63.000 56.330 49.370 38.680 41.100 41.950 42.500 37.430 45.120 38.200 47.690 61.857 42.240 53.730 ye ar 1990 1992 1992 1989 1992 1991 1989 1992 1991 1989 1988 1992 1992 1989 1991 1995 1995 1991 1989 1989 1988 1989 1992 1991 1991 1992 1990 1992 1991 1992 1990 1991 1992 1988 1989 C h an ge i n T o p Q u in ti le In co m e S h ar e (1 9 8 0 – 1 9 9 5 ) .05 –.16 –.03 .06 .19 –.08 .23 .14 –.08 –.01 –.07 .11 .02 .17 –.05 .02 .15 –.16 –.04 –.01 .03 .17 –.05 .06 .20 .00 –.01 .07 –.04 –.10 –.03 –.06 .02 –.07 –.04 T N C P en et ra ti o n ( 1 9 8 0 ) .087 .004 .069 .204 .032 .032 .139 .052 .063 .036 .096 .043 .027 .011 .034 .045 .113 .089 .036 .063 .007 .142 .033 .020 .187 .003 .040 .048 .018 .248 C o u n tr y T o p Q u in ti le I n co m e S h ar e (1 9 8 0 ) ye ar T o p Q u in ti le I n co m e S h ar e (1 9 9 5 ) ye ar C h an ge i n T o p Q u in ti le In co m e S h ar e (1 9 8 0 – 1 9 9 5 ) T N C P en et ra ti o n ( 1 9 8 0 ) UK .042 .010 .001 .113 .105 .026 .116 .024 .108 .043 .038 .001 .044 .051 .070 .529 .024 .057 .029 .058 .009 .030 .090 .117 .031 .027 .002 Mexico Morocco Nepal Netherlands New Zealand Nigeria Norway Pakistan Panama Peru Philippines Poland Portugal Puerto Rico Senegal Sierra Leone Singapore Soviet Union Spain Sri Lanka Sweden Taiwan Tanzania Thailand Tunisia USA Venezuela Yugoslavia Zimbabwe 54.500 46.150 59.200 35.670 40.570 44.200 41.050 41.270 52.420 58.190 53.300 34.564 42.500 52.600 60.900 52.500 46.590 34.000 35.000 36.820 39.450 37.040 36.600 51.100 50.000 37.660 41.500 48.200 40.830 68.000 1977 1984 1977 1981 1980 1986 1979 1979 1980 1981 1975 1980 1980 1979 1970 1968 1980 1980 1980 1980 1980 1980 1976 1981 1980 1980 1980 1981 1978 1969 59.300 46.300 44.817 36.360 44.730 48.290 41.550 39.700 59.800 50.397 52.500 37.660 40.420 53.200 58.637 63.417 46.590 36.600 35.280 39.357 38.980 38.660 45.440 58.500 46.330 40.840 44.100 58.410 39.035 62.357 1989 1991 1995 1991 1990 1992 1991 1991 1989 1994 1988 1992 1991 1989 1991 1989 1988 1989 1989 1990 1992 1992 1993 1992 1990 1991 1991 1990 1990 1990 .09 .00 –.24 .02 .10 .09 .01 –.04 .14 –.13 –.02 .09 –.05 .01 –.04 .21 .00 .08 .01 .07 –.01 .04 .24 .14 –.07 .08 .06 .21 –.04 –.08 Linda Beer and Terry Boswell55 The Resilience of Dependency 56 R E F E R E NC E S Ahluwalia, Montek S. 1993[1974]. “Income Inequality: Some Dimensions of the Problem” in Development and Underdevelopment: Th e Political Economy of Inequality eds. 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