Abstract
The present thesis focuses on the measurement of cross-country degrees of globalization and wage inequality, as well as an understanding of the relationship between them. The Theil index is used to assess the wage inequality, while factor analysis is applied to measure the globalization in both developed and developing economies. To investigate a probable non-linear relationship between globalization and wage inequality, Hansen’s threshold regression method is applied. Aside from the conventional factors like trade and foreign direct investment (FDI), we also looked at another potential factor such as education in our regression model. The FDI factor is verified by empirical study as the only threshold variable which can split the samples into two groups of economies. For the high-FDI group, their economies seem to enjoy more equal wages as the FDI improves.