Contemporary Issues in Economics: Effects of Globalization and Institutions on Income Inequality and Unemployment

Running head: CONTEMPORARY ISSUES IN ECONOMICS
Contemporary Issues in Economics
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1CONTEMPORARY ISSUES IN ECONOMICS
Introduction
The global economic scenario has undergone considerable changes and dynamics
over the years, with the integration and inclusiveness of the economies of different countries
with one another. Much of this integration and interdependencies of the economies of
different countries can be attributed to the international phenomena of considerable
importance, which include events like Globalization, Liberalization of the economies of most
of the countries as well as the development of technological and infrastructural aspects,
which have contributed significantly in setting up robust communication and multi-lateral
trade channels among different nations (Hewitt 2012). Over time, with the increase in the
complexity and expanse of economic activities between the nations and with the development
of a Capitalistic trend in these economies, various rules and regulations have been formed by
the governments of the countries to secure the interests of all the groups. International
organizations have also been developed with the objective of facilitating fair trade and
economic transactions across countries (Hirst, Thompson and Bromley 2015).
There however remains significant debate regarding the implications of Globalization
and the establishment of the institutions across countries. While some argue that these events
and the development of the global as well as country specific institutions have strengthened
the economic growth trends, others highlight that the same have led to increment in two of
the most bothering and concerning issues in capitalism- unemployment and income
inequality (Beck 2018). Keeping these views into consideration, the essay tries to analyse and
explain the actual effects of globalization and institutions on income inequality as well as
unemployment across nations as well as in the global scenario.

2CONTEMPORARY ISSUES IN ECONOMICS
Globalization
The term “Globalization”, economically refers to the dissemination and inter-nations
transfer of economic activities, businesses, technologies, capital and human resources. In
short, globalization has four basic aspects, which are as follows: Transactions and trade relations Movements of capital and investments Inflow and outflow of knowledge and technological innovations Migration of labours across the world
Effects of Globalization on Unemployment
Globalization is seen to have mixed effects on unemployment scenarios, with
different implications for different countries. Globalization has led to shift in the job patterns,
wage levels as well as immigration of labours, especially from the developing countries to the
developed ones. This has led to creation to employment opportunities to some extent. This is
evident from the growth of the different sectors of and increase in the rate of employment in
countries like India, China and other Asian countries. The level of minimum wages as well as
robust labour contracts, which have not been prevalent in the earlier times has been greatly
facilitated by the phenomenon of Globalization.
However, there has also occurred significant outsourcing from the developed to the
developing economies, which in turn has led to reduction of mid-level employments in the
developed economies (Kaplinsky 2013). The infiltration of foreign multinationals in the
developing countries, owing to globalization, has led to destruction of many small scale
indigenous industries, thereby leading to loss of economic and employment scopes in these
regions. This is clearly evident in case of the African countries as since the advent of