Globalization is simply restriction free movement of capital, labor and goods across a country's physical limits. Neoclassical (Solow) model of growth considers three ways in which globalization can help increase the financial condition of the poor countries by giving them job work. Globalization leads to inflows of money to the poor country and thus raises the wages of the people which in turn gives them better health benefits, safety and increase standard of living. Higher wages help the people migrate to wealthier countries where incomes are even higher and thirdly it gives them purchasing power for their desired goods. All this makes the salaries of low skilled workers shoot up.
Differences in the income between two nations are because of the Capital to labor ratio as the richer countries have more money per person. Globalization leads to money inflows to poorer countries and it also makes people migrate to richer countries in search of better jobs. It increases the Capital to......
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