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These inflows continue till the capital-labor ratio equals outs in both the countries. In the Solow model theory of factor endowment, free movement of factors makes the poor country richer and reduces the poverty gap between rich and poor countries. This poverty gap between the two countries leads to two things. Firstly, it raises the wages in poor countries and secondly, it leads to migration of unskilled workers to richer countries which not only raises that persons wages but also the people who don't migrate.
The affect of globalization on inequality and poverty can be seen by the Neo classical model of factor endowment...
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