Abstract
This study examines the capacity of modernization theory, dependency theory, world system theory, and political democracy theory to explain the determinants of income inequality in less developed countries. The study further examines how structural changes in the global economy, stemming from the collapse of the Bretton Woods system in 1971 and the OPEC oil crisis in 1973 and 1974, affect the impact of variables introduced by these theories on income inequality. Data from two cohorts of countries are used to test these theories. The first cohort contains twenty-nine countries with data on income inequality between 1968 and 1973, and the second cohort contains twenty-eight countries with data on income inequality between 19 85 and 1992. The results support relationships specified by dependency theory, world system theory, and political democracy theory. When both cohorts are analyzed simultaneously, trade dependency is positively related to income inequality, lending support to dependency theory. However, this effect is conditioned depending upon whether the country is peripheral or semiperipheral, with peripheral countries experiencing a stronger effect of trade dependence on income inequality. In addition, whether a country is peripheral or semiperipheral has an independent effect on level of inequality, with semiperipheral countries having a lower mean level of inequality than peripheral countries. These findings support world system theory. Political democracy theory is supported in the first cohort, but not in the second. That is, political democracy is negatively related to income inequality in the first cohort, but has no effect on income inequality in the second cohort. This study proposes that changes in the global economy condition the effects of democracy on levels of income inequality, leading to these results. These findings lend limited support to political democracy theory. Modernization theory is not supported by any of the analyses.
Morris, Theresa Marie (1996). Global economic changes and income inequality: a test of four competing models. Master's thesis, Texas A&M University. Available electronically from
https : / /hdl .handle .net /1969 .1 /ETD -TAMU -1996 -THESIS -M67.