ABSTRACT
In this original contribution, Edward N. Muller seeks to test the hypothesis derived from the dependency/world-system perspective that the financial dependence of developing countries is responsible for increasing income inequality within them. His approach is to examine the hypothesis alongside of the contrary view that suggests that the distribution of income within states is largely the result of internal noneconomic forces. Muller reviews the cases of Canada and Taiwan and finds evidence refuting the dependency/world-system perspective. He then turns to the cross-national data and finds four serious flaws with the income inequality data employed in virtually all previous studies. He corrects for three of those and seeks again to determine the influence of financial dependence on income distribution. Using transnational corporation penetration and the size of a country’s external public debt as measures of financial dependence, he finds that there is little support for the dependency/world-system perspective and suggests that future research concentrate on the autonomous role of the state.
