Increased income inequality globalizations critics

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Unformatted text preview: s Described below are some of the costs associated with globalization. Increased Income Inequality Globalization’s critics often point out that globalization seems to go hand in hand with increased income inequality in the world. Has income inequality increased? Yes it has. For example, 100 years ago people in rich countries had about 10 times more income than people in EXHIBIT 2-5 Annual Average Percentage Change in Output per Person in the 1990s +6 +4 Percent 02 (030-053) EMC Chap 02 +2 0 –2 Less globalized countries More globalized developed countries Source: World Bank. poor countries. Today, they have about 75 times more income. Without a doubt, globalization and income inequality (between rich and poor countries) are strongly correlated. The question, though, is whether globalization causes the income inequality. The critics of globalization say it does; the supporters say it does not. Losing American Jobs Many of the critics of globalization argue that globalization can result in Americans losing certain jobs. Suppose a U.S. company hires engineers in India to do jobs that once were done by During the 1990s, the annual average percentage change in output per person was positive for the more globalized developing countries. The percentage was negative for the less globalized countries. East Indian American Express employees work at their computer in Delhi, India. Name at least one possible cost and one possible benefit of American Express offshoring work to India. Section 2 Globalization 47 02 (030-053) EMC Chap 02 11/17/05 ? 4:14 PM The Price Gap Between Brains and Brawn: Is It Increasing? T he Indian Institute of Technology (in India) is one of the hardest universities in the world to be admitted to, largely because of its reputation. In an average year, about 178,000 high school seniors in India take the exam necessary to apply to the Indian Institute of Technology. Just over 3,500 students are admitted. In other words, only 1.96 percent of all applicants are admitted. In comparison, the admission rate of Harvard University is nearly 10 percent. Like the Indian Institute of Technology, prestigious U.S. universities such as Princeton, Stanford, and Duke have very selective admission criteria. Each year, students who have the grade point average and standardized test scores to (potentially) be admitted to these universities are turned away. This has been occurring at the same time that college tuition has been increasing rapidly. For example, during the period from 1990 to 2003, college tuition went up by 130 percent, considerably more than medical care costs, housing, and food. Around the world at other prestigious schools we see the same theme: the admission rate is usually low and the cost is usually high. As you know, grades (one admissions criterion) and money 48 Page 48 function as rationing devices. In the last chapter, you learned that because of scarcity, some mechanism has to ration the available resources, goods, and services. Still we have to ask: Why have both of these rationing devices—grades and money—become stiffer when it comes t...
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This document was uploaded on 01/16/2014.

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