Resolved: On balance, economic globalization benefits worldwide poverty reduction 3
Countries that are reducing poverty the fastest are the most globalized
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- World will become mostly middle class
- Three decades of data proves economic globalization reduces absolute poverty
- Strong empirical data demonstrates that increasing trade and information flows reduce poverty
Countries that are reducing poverty the fastest are the most globalizedLaurence Chandy, Geoffrey Gertz, 2011, Yale Global Online, January 5, “With Little Notice, Globalization Reduced Poverty,” http://yaleglobal.yale.edu/content/little-notice-globalization-reduced-poverty DOA: 1-1-15 Laurence Chandy is a fellow at the Global Economy and Development Program in the Brookings Institution. Geoffrey Gertz is a research analyst in the same program. How and why sustained high economic growth in developing countries took hold are questions likely to be debated by economic historians for many decades. Already one can point to a number of probable sources emerging or accelerating around the turn of the century: an investment boom triggered by rising commodity prices; high growth spillovers originating from large open emerging economies that utilize cross-border supply chains; diversification into novel export markets from cut flowers to call centers; spread of new technologies, in particular rapid adoption of cell phones; increased public and private investment in infrastructure; the cessation of a number of conflicts and improved political stability; and the abandonment of inferior growth strategies such as import substitution for a focus on macroeconomic health and improved competitiveness. These factors are manifestations of a set of broader trends – the rise of globalization, the spread of capitalism and the improving quality of economic governance – which together have enabled the developing world to begin converging on advanced economy incomes after centuries of divergence. The poor countries that display the greatest success today are those that are engaging with the global economy, allowing market prices to balance supply and demand and to allocate scarce resources, and pursuing sensible and strategic economic policies to spur investment, trade and job creation. It’s this potent combination that sets the current period apart from a history of insipid growth and intractable poverty. World will become mostly middle classLaurence Chandy, Geoffrey Gertz, 2011, Yale Global Online, January 5, “With Little Notice, Globalization Reduced Poverty,” http://yaleglobal.yale.edu/content/little-notice-globalization-reduced-poverty DOA: 1-1-15 Laurence Chandy is a fellow at the Global Economy and Development Program in the Brookings Institution. Geoffrey Gertz is a research analyst in the same program. The fight against poverty has long been a moral and strategic goal of Western governments. But the record of the last few years is likely a surprise to them. In their eyes, the fate of the world’s poor largely depended on forging progress on three fronts: debt relief, more aid and freer trade. World leaders convened at numerous meetings to build support and momentum around these priorities, but despite these efforts successes were hard to come by: While more than $80 billion of poor countries’ debt has been forgiven, most countries failed to meet global aid targets, and the Doha Development Round has languished at the World Trade Organization. Thankfully for the world’s poor, this logic turned out to be flawed. While progress on each of the three fronts would have been helpful for developing countries and their ability to tackle poverty, the significance of each was undoubtedly overhyped and said more about the West’s sense of responsibility and magnanimity than what was actually needed to deliver development. Taking a long view of history, the dramatic fall in poverty witnessed over the preceding six years represents a precursor to a new era. We’re on the cusp of an age of mass development, which will see the world transformed from being mostly poor to mostly middle class. The implications of such a change will be far-reaching, touching everything from global business opportunities to environmental and resource pressures to our institutions of global governance. Yet fundamentally it’s a story about billions of people around the world finally having the chance to build better lives for themselves and their children. We should consider ourselves fortunate to be alive at such a remarkable moment.
Using data from 114 countries (1983–2007), we examine the relationship between globalization and World Bank absolute poverty estimates. We find a significant negative correlation between globalization and poverty, robust to several econometric specifications, including a fixed-effect panel—a “long run” first difference—and a pooled OLS-regression. Introducing two instruments for globalization we also show that results are robust to correction for potential endogeneity. We motivate and test the instruments in several ways. In particular information flows and more liberal trade restrictions robustly correlate with lower absolute poverty. Strong empirical data demonstrates that increasing trade and information flows reduce povertyAndres Bergh, Therese Nelson, October 2014, Lund University, Sweden, Research Institute of Industrial Economics (IFN), Stockholm, Sweden, Is Globalization Reducing Absolute Poverty? World Development, pp. 42-61 This paper contributes in both these areas. Recent improvements in data availability allow a meaningful analysis of panel data where the dependent variable is head count measures of absolute poverty collected from the World Bank’s household surveys. Our regressions include more than 100 countries, with poverty data averaged over four five-year periods, the first one being 1988–92. We also introduce two instruments for globalization in order to examine whether the estimated relationships are causal: preceding average economic globalization of neighboring countries, and the number of years with the presence of McDonalds in a country. We examine both instruments carefully, showing that they are powerful, directly uncorrelated with poverty, and theoretically meaningful in the sense of capturing globalization the way it actually happens. Using the KOF Index of Globalization, (Dreher, 2006a, Dreher, 2006b and Dreher and Gaston, 2008) we find evidence of a negative relationship between different types of globalization and absolute poverty. The effect appears in a fixed-effect panel, a long first difference estimation, in a pooled OLS regression and when instrumenting for globalization. In particular, information flows and more liberal trade restrictions seem to reduce poverty. Section 2 provides an analytical framework discussing the possible links from globalization to absolute poverty. Section 3 describes our data and empirical strategy, and presents baseline panel regression results, with a number of robustness tests. Section 4 introduces our instrumental variable strategy and presents results when instrumenting for globalization. The article closes with some concluding remarks on the implications of the findings.
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