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On Growth and Income Distribution in a Globalizing World

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  • Roland Eisen

    (Goethe University (Frankfurt am Main, Germany))

Abstract

The basic idea explaining the relationship between economic growth and income distribution is the “U- shaped hypothesis” postulated by Simon Kuznets. This can be shown in a dual-economy model with technical progress. Initially, inequality is low, but as labour participation in the modern sector increases, higher wages in this sector tend to increase inequality. However, if enough labour is incorporated in the modern sector, wage inequality begins to diminish. Income inequality continues to worsen between the two sectors, if a new modern economy (e.g. IT-based technical change) is introduced and potential GDP shifts to a new trajectory before the turning point is reached. In a globalised word, the substantial unskilled-labour-saving technical progress puts pressure on wages of unskilled workers (in industrialized countries). Also, globalization may be blamed for leaving many nations and millions of people out from reaping the benefits of globalization. This problem can only be overcome by appropriate reforms of the international economic system.

Suggested Citation

  • Roland Eisen, 2008. "On Growth and Income Distribution in a Globalizing World," Revista de Economía y Estadística, Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas, vol. 46(2), pages 33-46, Diciembre.
    • Handle: RePEc:ief:reveye:v:46:y:2008:i:2:p:33-46
    DOI: 10.55444/2451.7321.2008.v46.n2.3851
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    References listed on IDEAS

    as
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    Keywords

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    JEL classification:

    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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