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Does globalization hurt the poor?

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  • Pierre-Richard Agénor

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    Abstract

    This paper examines analytically and empirically the extent to which globalization affects the poor in developing countries. I begin with a description of various channels through which trade openness and financial integration may have an adverse effect on poverty. I also stress the possible non-linearities involved – possibilities that have been seldom recognized in the existing literature. I then present cross-country regressions that relate measures of real and financial integration to poverty. The regressions control for changes in income per capita, as well as various other macroeconomic and structural variables, such as inflation, changes in the real exchange rate and the terms of trade, and schooling indicators. I use both individual indicators of trade and financial openness, and a “globalization index” based on principal components analysis, and test for both linear and nonlinear effects. The results suggest the existence of an inverted U-shape relationship between globalization and poverty. At low levels, globalization appears to hurt the poor; but beyond a certain threshold, it seems to reduce poverty – possibly because it brings with it renewed impetus for reform. Thus, globalization may hurt the poor not because it went too far, but rather because it did not go far enough. Copyright Springer-Verlag Berlin Heidelberg 2004

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    File URL: http://hdl.handle.net/10.1007/s10368-003-0004-3
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    Bibliographic Info

    Article provided by Springer in its journal International Economics and Economic Policy.

    Volume (Year): 1 (2004)
    Issue (Month): 1 (03)
    Pages: 21-51

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    Handle: RePEc:kap:iecepo:v:1:y:2004:i:1:p:21-51

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    Web page: http://www.springerlink.com/link.asp?id=111059

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    Keywords: Globalization; poverty; cross-country regressions;

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    Cited by:
    1. Chao-Hsi Huang & Kai-Fang Teng & Pan-Long Tsai, 2010. "Inward and outward foreign direct investment and poverty: East Asia vs. Latin America," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(4), pages 763-779, December.
    2. Tsai, Pan-Long & Huang, Chao-Hsi, 2007. "Openness, Growth and Poverty: The Case of Taiwan," World Development, Elsevier, vol. 35(11), pages 1858-1871, November.
    3. Chen,Derek Hung Chiat & Ranaweera,Thilakaratna & Storozhuk, Andriy, 2004. "The RMSM-S+P : a minimal poverty module for the RMSM-X," Policy Research Working Paper Series 3304, The World Bank.
    4. Yang, Jun & Huang, Jikun & Rozelle, Scott & Martin, Will, 2012. "Where is the balance? Implications of adopting Special Products and Sensitive Products in Doha negotiations for world and China's agriculture," China Economic Review, Elsevier, vol. 23(3), pages 651-664.

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