The Income Distribution Structure Under The Impact Of Globalization And Current Account Imbalances

There have formed two groups of current account in the world since2000s. America is the typical representative developed country with current account deficits, while China is the typical representative developing country with current account surplus. The imbalance threats the steady growth of global economy, and challenges the existing economic theories. We deem income distribution is one of the important reasons that cause global imbalance. In order to analyze the mechanism of income distribution on current accounts, we study in both theoretical way and empirical way.In the theoretical part, firstly, we deduce the transmission mechanism of income distribution on current accounts based on the theory of Kaleckian income distribution-effective demand. It shows that the effect of relative labor income share on the proportion of current account to GDP is uncertain, that the decreasing labor income share will improve the current account with the develop of economy, that adjustments of the degree of monopoly and the proportion of raw materials’costs to wage are the effective ways to influence current accounts. Secondly, we apply the Precaution Savings Theory to explain the difference of savings between developing and developed countries. The difference which influences current accounts directly is derived from the total income and the institutional factors such as social security system and financial market system. Lastly, analysis the differences of current accounts in developed countries in the view of labor market’s structure displays that countries with negotiation mechanism have a place in the international market and their current accounts are always surplus, while countries without negotiation mechanism have to face problems like unemployment and industry atrophy, and their current accounts are always deficit.This paper divides the19countries that absorbing the most of global imbalance of current accounts into two samples. The results of regressions of panel data from1990to2010indicate that relative labor cost, real effective exchange rate and net of inward direct investment all influence developed countries’current accounts significantly, that the effect of relative labor cost is the greatest, that the regressions results of developing countries are inconsistent. Income distribution imbalance is the most important factor which influences the current accounts of China and Philippine. To Thailand and Indonesia, the key factor is the government-led economic policy changes, while to Malaysia, that is the real effective exchange rate. Therefore, globalization makes developing countries with labor resources have a place in world economy, and in such a case, the growth rate of relative labor cost and the proportion of current account to GDP have a positive relationship. With the decreasing of the comparative advantage, the influences of government leading and relative price are more prominent.In the view of income distribution, the key of global governance is enhancing the level of aggregate demand to improve the global imbalance. Developed countries should change the trend of labors’incomes to increase the proportion of the earnings of middle-income and low-income groups, and set up the mechanism of coordination. Developing countries should change the structure of labor market, and governments should make great efforts to reallocate, to enhance the level of social security, which would stabilize the expectation of income and increase the proportion of consumption to aggregate demand.