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Is Globalization An Engine of Economic Development or A Major Driver of Income Inequality?

Globalization has led to both increased economic growth and income inequality between countries. While international trade has allowed for specialization and access to goods from around the world, improving standards of living, it has also contributed to differences in wages and trade values between developed and developing nations. Globalization has impacted goods/services, capital, and human migration in different ways. It has made trade in goods cheaper but patterns vary by country. It has given companies more access to international capital markets. And it has facilitated more migration between distant countries, driven by factors like inequality, demand for labor, and lack of opportunities.

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38 views

Is Globalization An Engine of Economic Development or A Major Driver of Income Inequality?

Globalization has led to both increased economic growth and income inequality between countries. While international trade has allowed for specialization and access to goods from around the world, improving standards of living, it has also contributed to differences in wages and trade values between developed and developing nations. Globalization has impacted goods/services, capital, and human migration in different ways. It has made trade in goods cheaper but patterns vary by country. It has given companies more access to international capital markets. And it has facilitated more migration between distant countries, driven by factors like inequality, demand for labor, and lack of opportunities.

Uploaded by

hugo ruiz
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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SERGIO CARRILLO, JAVIER CERRADA, HUGO NIETO

BAE2

Is globalization an engine of economic development or


a major driver of income inequality?
Globalization is the cause for the world economic growth because of the
interconnections between countries throughout the years that results in a better
standard of living and quality of life. The expansion of foreign trade channels has allowed
the import and exports of products that can be used all around the world, for example
vaccines that since 1900 have caused an increase of global average life expectancy. In
the period in which international trade expanded (19th century) the average world
income increased and the proportion of people living in extreme poverty decreased.
International trade contributes to economic growth because nations can specialize
producing the goods they are efficient producing. Also due to globalization the cost of
manufacture decreases so companies can offer goods for lower prices to consumers and
therefore their budget allows them to access a wider variety of goods increasing their
quality of life.
Despite that, globalization leads to income inequality between countries because of the
specialization and different trades. Developed countries because of their GDP ratios
have a larger value and volume of trade than other countries. Also, different wages
applied depending of the trades can produce inequality.

Distinguish the effects of the gobalization in the three markets:


goods and services, capital and migrations.
The effects of globalization on goods and services have had many effects; many of the
traded goods have made trade in goods cheaper, thus being a major driver of trade while
in many countries such as the UK trade in goods accounted for slightly less than half of
all exports, and in many others almost all exports are services as in countries such as the
Bahamas. In many other cases the opposite is true as shown in the graph for Venezuela
and Nigeria where services represent a much smaller share of all exports. Globally
speaking for all countries, goods account for a large majority of all trade transactions. In
terms of internal and external value added, goods and services are used in companies
and then exported.
The growth of global capital markets incorporation facilitates companies access to
capital outside their home countries. Companies access international capital markets
through means such as initial public offerings, seasoned equity offerings, cross-listings,
depositary receipts, special purpose acquisition companies, shelf offerings, private
equity and other informal channels of equity capital. Companies can also access capital
outside their home market through bank loans and foreign bond issues.
Globalisation has facilitated migration in increasing numbers between increasingly
different and distant countries. Other factors that explain the increase in migration are
the international and national inequalities, the persistent demand for labour and low
SERGIO CARRILLO, JAVIER CERRADA, HUGO NIETO
BAE2

skills in the separate labour markets of rich societies, and the lack of opportunities,
population growth, oppression and violent conflict in developing countries

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