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On Growth and Income Distribution in a Globalizing World

  • Roland Eisen

    ()

    (Goethe University, Frankfurt a.M.(Germany))

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    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.

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    File URL: http://ief.eco.unc.edu.ar/files/publicaciones/economiayestadistica/2008_46_n2/REyE_47n2_04_Ongrow.pdf
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    Article provided by Universidad Nacional de Córdoba, Facultad de Ciencias Económicas, Instituto de Economía y Finanzas in its journal Revista de Economía y Estadística.

    Volume (Year): XLVI (2008)
    Issue (Month): 2 (July)
    Pages: 33-46

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    Handle: RePEc:ief:reveye:v:46:y:2008:i:2:p:33-46
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    1. Jeremy I. Bulow & Lawrence H. Summers, 1985. "A Theory of Dual Labor Markets with Application to Industrial Policy, Discrimination and Keynesian Unemployment," NBER Working Papers 1666, National Bureau of Economic Research, Inc.
    2. Daron Acemoglu, 1998. "Why Do New Technologies Complement Skills? Directed Technical Change And Wage Inequality," The Quarterly Journal of Economics, MIT Press, vol. 113(4), pages 1055-1089, November.
    3. Kylymnyuk Dmytro & Maliar Lilia & Maliar Serguei, 2007. "Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited," The B.E. Journal of Macroeconomics, De Gruyter, vol. 7(1), pages 1-44, August.
    4. Philippe Aghion & Peter Howitt, 1997. "Endogenous Growth Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011662, June.
    5. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
    6. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
    7. Nicola Brandt & Jean-Marc Burniaux & Romain Duval, 2005. "Assessing the OECD Jobs Strategy: Past Developments and Reforms," OECD Economics Department Working Papers 429, OECD Publishing.
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