ABSTRACT
Theories of economic growth and international trade have indicated that increased capital mobility and liberalized trade will reduce global income inequality. This chapter reviews the growth and trade theories and assess their empirical support, referring both to the literature and to a survey of wages in specific occupations in major developing country urban centers. The recognition of a persistence in the gap in living standards across countries led to a reconsideration of the theory of economic growth. The new growth theories have provided an explanation of absolute growth rate divergence. The chapter focuses on some policy alternatives to neoliberalism, and presents a review of the revival of mainstream free-market theories of international trade and economic growth. Economic globalization is the internationalization of production and finance. The chapter argues that labor market segmentation under conditions of weak and volatile aggregate demand may also be important for the persistent wage inequality in developing countries. .
