Globalization, Growth, and Inequality

This paper is a literature review, aiming to provide a holistic perspective on the nexus between globalization, growth, and inequality. Being integrated into the global production value chain, workers in developing countries move out of the subsistence sectors and improve skills in the process of learning by doing. Some developmental governments invest a lot in education and infrastructure to further improve human capital and competitiveness when they have capital accumulation, aiming at climbing up the value ladder. Real wage growth occurs in some developing countries, e.g., China. However, the profits from lowering manufacturing costs by relocation of labour-intensive sectors go to the capitalists, contributing to enlarging income inequalities in developed countries (Financialization). Freed from labour intensive work but faced with wage competition from developing countries, the ordinary working class in developed countries are experiencing wage stagnation. While the concept of living standard includes not only income, but also the number of products and services a person can consume; even with wage stagnation, people in developed countries can improve their standard of living by consuming an increased variety of products at low price. It is low- and middle- skill workers who take the brunt of globalization since the labour market is not a single, fluid market. Therefore, more targeted welfare policies are needed to assist people in plight. Even industrial policies can be used to boost economic development and employment in certain region. Globalization is a contributor to global wage levelling