Giray Gozgor and Priya Ranjan on globalization:
A lot of empirical work has documented a significant rise in inequality across many countries over the last 35 years. Globalization and skill-biased technological change have emerged as the key factors responsible for the rising inequality. If globalization creates rising inequality, one would expect democratic societies to engage in redistribution to widely share the gains from trade. That is, one can expect globalization to lead to greater redistribution as well. However, globalization can also put constraints on the ability of the welfare state to redistribute. For example, a higher taxation could lead to a flight of mobile factors of production (skilled labor and capital), or increase distortion in the labor supply decision of higher earning factors such as skilled labor, which would reduce output and per capita income. This makes it interesting to study the relationship between globalization and redistribution.
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