Income Inequality and Globalization: A New Perspective with Respect to Ethnic and Religious Diversification

Globalization impact on income inequality remains in debates since the advantages of liberalization had been realized by the world over mercantilism. The current study focuses on how globalization has impacted nation’s income inequality which are ethically and religiously homogeneous verses heterogeneous. The study examines relationships by using the data of 48 countries for the period of (1990-2022). The countries have been bifurcated in two groups; one with high ethnic and religious diversification and other with low. Driscoll-Kraay standard errors linear regression model was applied to examine the relationship. Our research disclosed unconventional findings; KOF-globalization positively influences the Gini-inequality in homogeneous countries but in heterogenous nations the relationship is inverse. Secondly, HDI and GDP per capita shows mere impacts as compared to Urbanization and Governance quality driving the inequality in real terms. Conclusively, higher ethnic-religious diversified nations look better off compared to less diversified nations in handling impact of globalization on inequality. As policy recommendation we urge countries to frame their counter-inequality policies by giving due weight to social demography. It warrants further investigation to dig deeper into contrasting relationships between globalization and income inequality in back drop of ethnic-religious diversification.