Book Chapter
Globalization, Technology and Income Inequality

Provides a critical analysis of some widely accepted explanations for the significant changes in income distribution that have occurred in many advanced countries during the last two decades. Much of the vast literature on the subject emphasizes the role of globalization and technology as the primary influence(s) on income distribution in industrial economies during this period, and this study assesses the validity of these propositions and provides an alternative analytical and policy perspective; it also considers whether these globalization and/or technology theses can be applied to developing countries. The study starts with an introduction, and then the second section outlines the main stylized facts about inequality of income distribution and other unfavourable labour market tendencies (high unemployment and deindustrialization) that have come to characterize industrial economies during the 1980s and 1990s; it also reviews the relevant characteristics of North–South trade in manufactured products. The third section outlines the nature of the ‘Transatlantic Consensus’ that has emerged in this area, notwithstanding serious methodological differences between trade and labour economists; this consensus gives a unified explanation for increased income inequality in the US and of high unemployment in Europe within the same conceptual framework. The fourth section provides a critique of the Consensus and suggests an alternative perspective on income inequality, unemployment, and deindustrialization in advanced countries; the fifth and sixth assess the extent to which changes in income inequality in developing countries can be attributed to globalization, technology, and financial liberalization; and the last section sums up the discussion and outlines policy conclusions, which are substantially different than those that follow from the Transatlantic Consensus.