Class 22

Class 22 - Problem 1 Low skill vs high skill Low skill...

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Problem 1: Low skill vs high skill Low skill folks exposed to global competition Rural vs Urban Rural producers face global competition Rural folks face commodity price volatility What are the causes of inequalities in the West 1975 in US: folks at the 90 th percentile earned 3 times as much as folks at the 10 th percentile. 2005 in US: folks at 90 th percentile earned 5 times as much as folks at the 10 th percentile. Why is this happening? Trade Mechanization But most of all is premium to education: trade and mechanization hurts those with lower skills. Caveat: this is not all because of globalization Deindustrialization/lack of jobs for low skilled workers in West began prior to 1980s. But globalization has accelerated the process. Key: Comparative Advantage Low-skill workers in high-wage economies exposed to greater levels of competition Effect of globalization. Technology requires higher skills/education that many workers have Effect of education premium. Bottom Line: inequality up, despite overall economic growth/increase in jobs on global level. Problem 2: Volatility/Interconnection Global economy means shocks in one place are felt in others. US recession means US buys less oil. When shock is in another state, less control over outcomes.
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Class 22 - Problem 1 Low skill vs high skill Low skill...

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