Tuesday, October 23, 2007

In praise of globalization

Freeexchange in a post headlined "Oh no, globalization increases the return to human capital"
An ideological fixation on inequality is especially perverse when it comes to less-developed nations. In these cases, we must be most concerned with increasing absolute standards of living across the income scale, and especially at the bottom. ... [The evidence is] globalisation is improving life for poorer workers around the world. Excellent! And that's about all we need know to get four-square behind expanding global trade.

Now, it is certainly interesting to explain the difference in rates of wage increase -- once we have firmly grasped that there is increase across the board. The IMF study finds that trade alone brings up the bottom and tends to reduce inequality. However, technology transfer and foreign investment, which tends to be tech-related, has bid up the price for certain kinds of highly skilled labour faster than it has for lower skilled labour, more than offsetting the equalising tendency of trade alone.

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