Impact of trade on Inequality - Essay Example

Impact of Trade on Inequality Impact of Trade on Inequality Contribution of equality within trade A key aspect of openness is that the developing countries and the poor individuals living in them usually benefit. Pre-openness economists held the viewpoint that the poor usually gain adequately through the global trade. Other parties also viewed that a substantial part of global trade benefits is directed to the poor. This implies that trade functions in the direction of reducing absolute poverty by enhancing economic growth and not advancing inequality.

However, the benefits that come from openness do not benefit the poor since they are ripped by the rich. Mostly, this takes place because the usage and the application of various useful technologies in trade is only available to the highly skilled and trained people but not to the unskilled and the poor. During several previous centuries, inequality in world trade has been on the rise. Income within most countries has been rising and declining drastically. Specifically, it has been increasing in the developing countries and falling in the highly industrialized and developed nations.

However, this trend is becoming reversed in the Organization for Economic Cooperation and Development. This implies that there is no global inequality trend for the previous two centuries. Therefore, almost all the rise in world income inequality has taken place due to the increasing gaps between countries rather than increase of gaps within countries. Meanwhile, integration in world economy has advanced. If this relationship meant causation, it would be that the increase in inequality among nations has been caused by globalization but inequality within nations has not been elevated.

The effects of globalization and its result have gone both ways with respect to disparity within nations. This is according to simple correlation between the perceived trends. The following conclusions can be deducted from the economic record of inequality:a) The disparity between incomes among countries has reduced. This has been the result of the globalization factor as well as commodity markets for the nations that have been integrated into the global economy. b) Inequality has also been lowered by opening up to the international business as well as the international factor movements within labor-filled countries.

This has taken place within the past few decades. c) Inequality has increased within countries especially where labor is limited. This is because the limitation opens up to international factor movements or immigration that increases labor. d) Consideration of various intra-national as well as international effects indicates that increased globalization leads to lower inequality globally. e) Global incomes would continue to be persistent especially under a complete global integration. This is similar to inequality in large integrated economies from a domestic perspective.

This situation is lower in a completely integrated global economy than it would be in a fully segmented economy.These conclusions are reached following consideration of four main considerations; source of globalization, world inequality components, extent of globalization for countries, and the period involved from a historical perspective. The two key components of global inequality are intra-country inequalities and between income averages of the country. These are assessed separately. When inequality takes place within a country, it calls for awareness of determinant factors and the relationship to the income distribution.

Among countries, inequality requires attention to the determinants of per capita income. Intra-country and international inequalities ought to be handled differently since they have varying consequences for the policy responses. In addition, world inequality resulting from spread of people within countries also has different consequences for policy makers. The most important inequality components depend on whether the observers care about individuals in other countries as much as they do for themselves and citizens in their countries.

A global stand is taken in this research although there is a warning that national policies are derived from national attitudes concerning intra-national globalization effects. Globalization debates present an alternative where barriers to trade as well as factor movement replace liberal policy. In the past, globalization has been propelled by forces unrelated to policy. These include productivity improvements, transport relations, and probable specialization gains. These may bring varying results for global income disposal as compared to policy alterations.

Globalization events have different effects on the participating countries and the un-participating ones. When holding other factors constant, it can be concluded that income convergence among countries with more integration is higher. The countries participating in global markets experience different effects according to participation extent. Due to these differences various factors are affected and include income distributions, cross boarder factor flows, and trade gains.