ABSTRACT
Developing countries are increasingly concerned about effects of globalization on regional inequality. This paper develops an empirical method for decomposing the contributions of two major driving forces of globalization, foreign trade, and foreign direct investment (FDI), on regional inequality and applies it to China. Even after controlling for many other factors, globalization is still found to be an important factor contributing to the widening regional inequality. The paper ends by investigating the role of factor market segmentations in aggravating the distributional effect of changing regional comparative advantages in the process of globalization.
