Globalisation, Social Welfare, Public Policy and Labor Inequalities

Income inequality has increased sharply in higher income and in many lower income countries. Theories attributing this to bifurcation of labor markets in higher income countries are examined. Some theorists attribute this bifurcation primarily to technical change with influence from globalization. Others take an opposite viewpoint. A contrasting view presented here is that globalization is strongly linked with technological change. More significantly even if globalization increases economic efficiency and growth in globalizing countries, it can raise income inequality and reducè social welfare in such countries. International fiscal competitiveness may, it is argued, contribute to income inequality and make all nations worse off. Trends in public social expenditure and in taxation receipts in higher income countries, including Singapore, are examined to determine the extent of empirical support for the theory