CHAPTER ONE

INTRODUCTION

1. BACKGROUND OF THE STUDY

Globalization is a phenomenon which has been embraced by all nations and shaped the global world. Although globalization is not new, it has intensified in its ramifications in recent years and become a very important issue for discussion in various forums as it began to occur at an increased rate over the last 20 - 30 years under the framework of General Agreement of Tariff and Trade (GATT) and World Trade Organization (WTO). Globalization is the increasing economic integration and interdependence of national, regional and local economies across the world through an intensification of cross border movement of goods, services, technologies and capital. Kwanashie (1998) sees globalization as a process of integrating economic decision making such as the consumption, investment and saving process across the world. Globalization is therefore seen as a situation where the world is viewed as a single market in the acquisition, utilization and development of productive resource. There exist as a single competitive market for all business transaction.

It is widely accepted that increase in globalization is associated with rising income inequality in the world. A combined income of 500 richest individuals in the world are greater than 2.5 billion poor people (Watkins et al., 2005). Therefore, understanding the nature of, and linkages between income inequality and globalization is crucial. Globalization has been perceived by both anti-globalist commentators and pro-globalist commentators.

In reality, globalization is a new name for Laissez Faire economy and attempt to unify normative principle of organization for all the countries of the world by largely accounting for developed economies integrating with less developed economies by means of foreign direct investment, reduction of trade barriers and in many cases cross border immigration. Although the political, cultural, social and environmental aspects of globalization are no doubt important, the economic aspect is perceived to be at the heart of the globalization process (Obadan 2006). Economic globalization fosters the advancement of a global mentality and conjures the picture of a borderless world bringing growing tendency towards the universal homogenization of ideas, cultures, value and lifestyle through trade, banking, communication, transport etc (Akor et al 2012).

The anti-globalist commentators (Stiglitz, 2003) argued that globalization has adverse effects on particularly poor economies due to the increase in within or between countries income inequality and there is a need for government intervention to control the adverse effect of globalization on income. While the pro-globalist commentators (Roud and Whalley, 2004; Bhagwati, 2004) argued that increase in income inequality due to globalization is a reasonable price to pay for the benefits of world integration and generally it leads to reduce poverty and creating employment. Therefore, there are challenges that whether globalization lead towards rising income inequality or dampening income inequality.

The world merchandise trade increased 7 percent per year on average attaining a peak of US$ 18 trillion in 2011 during the last 30 year. During this period, developing countries especially Asian economies have seemed to play an increasing role in world trade (World Trade Report 2013). In this globalized world, when exports benefit a bigger share of population in a country, it cause a reduction in country’s income inequality otherwise increasing exports cause income inequality to rise. The impact of financial globalization is associated with higher economic growth. Financial globalization cause reduction in income inequality because of an increasing access of finance. But this depend upon the quality of institutions in the economies. When countries have poor quality of institutions, the advantages of financial integration are mostly accrued by rich, who have better access to the opportunities. In case of good institutions the benefits of financial integration are distributed among all segments of the society equally (Lee, 2014). Technological globalization also plays an important role in the development of the economies and effects the distribution of income, particularly for developing countries (Liu and Lawell, 2015).

1. STATEMENT OF THE PROBLEM

Globalization is considered to be a multidimensional phenomenon, which include different aspects of political, social, cultural and economic sphere but the major concern of economists and policy makers is economic globalization and its impact on the income of the people (Ogunyomi et al., 2007). Economic globalization is a process of rapid increase in the liberalization of international trade, investment, finance, and technological changes among countries (Torres, 2001). The impact of globalization is not evenly distributed among all segments of the society, especially the effect of globalization on employment and income.

There are relatively limited studies on the impact of globalization on income inequality in advanced and developing economies. The literature on globalization (as international trade) and income inequality is divided into two strands. The first strand advocates that due to the increase in trade globalization there is a rise in income inequality (Silva and Leichenko, 2004; Rudra, 2004; Felbermayr, 2005; Beckfield, 2006; Ali and Isse, 2007; Meschi and Vivarelli, 2007; Aradhyula et al., 2007; Lu and Cai, 2011; Bensidoun et al., 2011; Cassette et al., 2012; Demir et al., 2012; Rodriguez-Pose, 2012; Munir et al., 2013; Hepenstrick and Tarasov, 2015). The second group advocates that due to the increase in trade globalization there is a decline in income inequality (Chakrabarti, 2000; Silva, 2007; Babones and Zhang, 2008; Tian et al., 2008; Georgantopoulos and Tsamis, 2011). Existing literature take international trade as globalization and measure its impact on income inequality, while only few studies take other aspects of globalization combined with international trade. However, there exist limited work for financial globalization and technological globalization and their effect on income inequality. The present study aims at filling this gap by adding both financial and technological globalization combine with trade globalization and measure its impact on income inequality.

1. AIM AND OBJECTIVES OF THE STUDY

The aim of this study is to investigate the impact of globalization on income inequality in Nigeria.

The study is anchored on the following objectives as presented:

1. To examine the causes of globalization on income inequality in Nigeria
2. To ascertain the positive impact of globalization on income inequality in Nigeria
3. To ascertain the negative impact of globalization on income inequality in Nigeria
4. To assess the relationship between globalization and income inequality in Nigeria.
   1. RESEARCH QUESTIONS

Arising from the research objectives, the following research questions will be address in the study:

1. What are the causes of globalization on income inequality in Nigeria?
2. What are the positive impacts of globalization on income inequality in Nigeria?
3. What are the negative impacts of globalization on income inequality in Nigeria?
4. What relationship exists between globalization and income inequality in Nigeria?

1. RESEARCH HYPOTHESIS

H0 there is no significant relationship between globalization impact and income inequality.

H1 there is significant relationship between globalization impact and income inequality.

1. SIGNIFICANCE OF THE STUDY

This study is on impact of globalization on income inequality in Nigeria is very important because the finding of this study will reveal the extent to which globalization has affected both positive and negative the income inequality in Nigeria.

The study finding will also reveal the hidden causal factor of globalization in Nigeria and the appropriate measures to adopt in order to remedy the impact of globalization on income inequality in Nigeria.

It will enable policy makers in the States to come out with policies and measures geared at targeting the remedy impact of globalization on income inequality in Nigeria.

1.7 SCOPE OF THE STUDY

The study is limited to the investigation into the negative and positive impact of globalization, as well as the causes and the relationship that exist between globalization impact and income inequality.

1. LIMITATION OF THE STUDY

TIME CONSTRAINTS: One the challenges experienced by the researcher is the issue of time; the research will simultaneously engage in departmental activities like seminars and attendance to lectures. But the researcher was able to meet up with the deadline for the submission of the project.

FINANCIAL CONSTRAINTS: Every research work needs funding; however lack of adequate funds might affect the speed of the researcher in getting materials for completion of the project.

1. DEFINITION OF TERMS

Globalization

 Is the connection of different parts of the world resulting in the expansion of international cultural, economic, and political activities. It is the movement and integration of goods and people among different countries.

Income

Is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms. ... For a firm, gross income can be defined as sum of all revenue minus the cost of goods sold.

Inequality

A relation between two values when they are different.

Economic Growth

Can be defined as the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. ... The "rate of economic growth" refers to the geometric annual rate of growth in GDP between the first and the last year over a period of time.