Date of Submission


Date of Award


Institute Name (Publisher)

Indian Statistical Institute

Document Type

Doctoral Thesis

Degree Name

Doctor of Philosophy

Subject Name

Quantitative Economics


Economic Research Unit (ERU-Kolkata)


Gupta, Manash Ranjan (ERU-Kolkata; ISI)

Abstract (Summary of the Work)

Globalization and Skilled-unskilled wage inequality Globalization is the process of integration various economies of the world without creating any hindrances in the free flow of goods and services, technology, capital and even labour of human capital. The term, globalization has, therefore, following parameters: (i) Reduction of trade barriers to permit free flow of goods and services among nation-states; (ii) Creation of environment in which free flow of capital can take place among nation states; (iii) Creation of environment, permitting free flow of technology; and (iv) Last, but not least, from the point of view of developing countries, creation of environment in which free movement of labour can take place in different countries of the world.Thus, basically globalization signifies a process of internationalization plus liberalization. Since the formation of the World Trade Organization (WTO), there have been revolutionary changes in liberalizing international trade across countries whether developed or developing. Liberalization of trade involves removal of quantitative restrictions as well as reduction in tariffs on trade and also some other measures to facilitate trade and input flows across the world as they would help to integrate domestic market with the world market.According to the traditional theory, globalization leads to an improvement in welfare both from the aggregative and distributive perspectives. If globalization improves welfare from distributive perspective, then it should improve skilled-unskilled wage inequality. Here, skilledunskilled wage inequality means, wage inequality between two different groups of people; one who have skill and one who don’t have skill. Developed and less developed countries, who generally play opposite roles on international factor movements and face opposite type of changes in the relative price structure of traded goods due to trade liberalisation, should face opposite movements in the degree of skilled-unskilled wage inequality. This is the outcome of Stolper Samuelson theorem in a Heckscher-Ohlin-Samuelson (HOS) set up.However, empirical works fail to point out this asymmetric movement of skilledunskilled wage inequality and find a symmetric rise in skilled-unskilled wage income inequality all most in every part of the world except for East Asian countries. There exists a vast empirical literature pointing out that income inequality has grown in various countries in the form of a decline in income and employment of unskilled labourers compared to those of skilled labourers. This growing income inequality has been observed in U.S.A. during 1960s and in European countries between 1978 and 1988. We find similar observations in many developing countries too. Wage inequality has gone up in many Latin American and South Asian countries in the mid 1980s. However, the experience of East Asian countries between 1960s and 1970s advocates the conventional theory that a greater openness to the rest of the world leads to a decrease in the skilled-unskilled wage gap . Different empirical studies provide different explanations for this growing income inequality. Trade liberalization and technological development are the main two controversial reasons of this phenomenon. According to Wood (1998), Beyer et. al. (1999), Green et. al. (2001), Behrman et. al. (2000), Isgut (2001) etc.


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