INEQUALITY OF INCOME

Globalisation increases the Inequality of Income both within and between Countries



Globalisation increases the Inequality of Income both within and between Countries

Introduction

One of the most controversial aspects of the debate on globalization is the impact of it on poverty and inequality on the planet i.e. between countries. Economic globalization comprises of addressing business process that integrate free movement of people. Each of this transaction will have different impact on poverty and inequality. Globalization, poverty and income inequality are multidimensional and according to different studies they are so complicated since they interlink with each other and hence, incorporate both subjective as well as objective elements. The focus of this paper would be on Globalization and where this globalization has increase the inequality of income with the countries and between countries.

Discussion

Background

A recent report by the International Monetary Fund (IMF) indicates that the increased globalization of the last two decades contributed greatly to the increase in inequality in both developed countries and less developed. According to the analyst report, the report has highlighted the drawbacks i.e. globalization is an enemy of inequality, and it is a way for the IMF to stress on the disadvantages of globalization. On the contrary, a careful review of the report on income inequality gives an optimistic i.e. the effects of globalization on developing countries evaluation (Hellier, Chusseau, 2012, p. 12).

The report analyzes what happened to income and inequality in more than 50 countries, concluding that all achieved substantial increases in Per Capita Income since the early 80s. Although the increase was positive at different income levels, including the lowest and growth was not uniform. Revenue increase among people that were more skilled and these people were earning much more than person having less skill, this further state that inequality tended to increase in developing countries (David, 2011, p. 14).

To explain these results, the researchers have divided the effects of increased globalization in more trade, more foreign investment and transfer of modern technologies. They conclude that these three dimensions of globalization tend to increase the per capita income of developed countries and in developing countries (imf.org). The international trade theory implies that international trade in poor countries increases the earnings of less skilled workers, because the rich countries want to import products that use large amounts of unskilled labours in manufacturing things like textiles. The report confirms something fundamental trade theory i.e. increased international trade reduces income inequality in developing countries (Jaumotte, Lall, Papageorgiou, 2013, p. n.d).

However, the most powerful effect of globalization on income inequality is caused by the transfer of modern technologies Evidence in developed economies is that modern technologies such as computers and the internet, favour workers with more education.; in economic terms, these technologies favour the better trained. This result of technological progress is used to explain the growing income gap between college graduates and everyone else over the last 30 years in the United States (imf.org). Not surprisingly, the IMF research finds the same trend in the developing ...