The Impact of Income Inequality on Human Capital Accumulation by External Transactions Using Simultaneity in Panel Data

This study analyzes the impact of income inequality on human capital accumulation in developed and developing countries through trade openness. The empirical analysis results are as follows. Income inequality negatively affects human capital accumulation in developed countries. However, in developing countries, income inequality has a positive effect on human capital accumulation. Similar results were derived in both the long term and the short term.Trade openness has a positive impact on human capital accumulation in both developed and developing countries. Meanwhile, in developed countries, human capital accumulation was found to reduce income inequality, whereas in developing countries, human capital accumulation exacerbated income inequality. Trade openness increased income inequality in developed countries, but it mitigated income inequality in developing countries through income redistribution on unskilled workers. These results suggest that under trade openness, human capital accumulation and income inequality interact with each other, and the extent of their impact depends on the stage of economic development.