Synopsis
The effect of globalisation, technological development and income inequality has been growing issues in developing and emerging economies. The globalisation has both positive and negative effect on developing economies as stated by several empirical researches. Globalisation has facilitated technological progresses in terms of economic growth, trade and structural change. Vivarelli (2014) stated that technological progresses facilitate rapid development of agriculture, industry and service sector. Opportunity of employment increases in the economy, which further swells the income level and standard of level of people. Globalisation facilitates mobilisation of resources, international trade by removing trade barriers and acts for economic growth of developing nations. Capital inflows through foreign direct investment, increasing scope of import and export have positive effect on economic development such as income generation, poverty reduction, and human capital formation.
Studies have found several negative effects of globalisation and technological changes. Dabla-Norris et al. (2015) mentioned that technological innovation makes structural change in the economy, which creates trouble in terms of joblessness in the economy. Relevant skills and knowledge are required for getting employed in a different sector. The chances of getting job reduce in the absence of sufficient skill and knowledge. Demand for unskilled labour falls in the economy. Globalisation increases the scope of movement of workers across countries, creating pressure on domestic job market. Moreover, technological development supports capital intensive techniques in the production process displacing labour. Therefore, unemployment rate and income inequality rises in the economy. Sustained inequality in the economy damages economic growth and discourages investment by reducing aggregate demand.
References
Dabla-Norris, M.E., Kochhar, M.K., Suphaphiphat, M.N., Ricka, M.F. and Tsounta, E., 2015. Causes and consequences of income inequality: a global perspective. International Monetary Fund.
Vivarelli, M., 2014. Innovation, employment and skills in advanced and developing countries: A survey of economic literature. Journal of Economic Issues, 48(1), pp.123-154.
