The expanded inequality of income distribution has been discussed worldwide, not only in the developing countries but also in the developed ones. We need the theoretical examination as well as the empirical one on this inequality. In the previous paper, Fukiharu (2009) conducted one theoretical examination: whether the inequality expands through ICT innovations. In the present paper, from a different viewpoint the inequality is examined theoretically. This viewpoint is "globalization of economy". In an elementary economics course, the "gains from trade for small country" is taught in such a way that a small country gains by adopting (free) trade. It must be noted that the consumers' surplus increases (decreases) when the producers' surplus decreases (increases), while the increment is always greater than the decrement. This elementary theory with trade-offs between the demander and the supplier is one of the motives in this paper on the expansion of inequality of income distribution through globalization. First, it is examined in terms of simulation approach whether the inequality expands through the globalization of a small country, which possesses small amount of initial endowments of working hours and capital goods compared with the other trading country, utilizing Heckscher-Ohlin model. Heckscher-Ohlin model is an application of general equilibrium theory with trading two countries. First, after production functions, utility functions, and initial endowments are specified randomly, Gini coefficient is computed for the income distribution in a small country, A, isolated from the world economy, in the general equilibrium. A modification is made somewhat into the traditional Heckscher-Ohlin model, in such a way that the two production functions are under decreasing returns to scale, so that positive profit accrues to the entrepreneurs. Thus, there are four consumers of goods: the aggregate workers, the aggregate capitalists, and two entrepreneurs. In this modified model, supposing that the country A opens its economy to a large country B, which possesses large amount of initial endowments of working hours and capital goods, Gini coefficient is computed for the income distribution with the four economic agents in country A, in the general equilibrium with trade. If the former is smaller than the latter, it is defined that the inequality expands through the globalization. Selecting 1000 randomly specified tuples of parameters on Cobb-Doulas type production and utility functions for two countries and initial endowments of working hours and capital goods, selected small for country A and large for country B, we compute the per cent of the inequality expansion cases among the 1000 random selection. Repeating this simulation 20 times, we have the conclusion that out of 1000 simulations, approximately 65% indicates the country A's expanded inequality of income distribution through globalization. It is also confirmed that the percentage for country A's expanded income distribution cases is approximately 55% when initial endowments are selected without smallness restriction on country A. Next, the third commodity is introduced into the basic model. This commodity is a non-traded commodity, while the third production function is also under decreasing returns to scale, so that positive profit accrues to the third entrepreneur. Thus, there are five consumers of goods: (aggregate) workers, (aggregate) capitalists, and three entrepreneurs. Utilizing the same simulation approach, we examine what is the percentage of expanded inequality case among the 1000 simulations. By the similar approach, the result is that approximately 55% out of 1000 simulations indicates the expansion. Finally, we examine how the percentage changes when the third commodity is a traded commodity. By the similar approach, the result is that approximately 61% out of 1000 simulations indicates the expansion. In this way, we may conclude that the globalization has a clear tendency to expand the income distribution inequality when a trading country is small, however small the effect might be.
