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Globalization and Africa: implications for human development

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  • Asongu Simplice

    ()
    (Yaoundé/Cameroun)

Abstract

Purpose – The purpose of this paper is to assess the effects of trade and financial globalization on human development in 52 African countries using updated data (1996-2010) and a new indicator of human development (adjusted for inequality). Design/methodology/approach – The estimation technique used is a Two-Stage-Least Squares Instrumental Variable methodology. Instruments include: income-levels, legal-origins and religious-dominations. The first-step consists of justifying the choice of the estimation technique with a Hausman-test for endogeneity. In the second-step, we verify that the instrumental variables are exogenous to the endogenous components of explaining variables (globalization dynamic channels) conditional on other covariates (control variables). In the third-step, the strength and validity of the instruments are assessed with the Cragg-Donald and Sargan overidentifying restrictions tests respectively. Robustness checks are ensured by: (1) use of alternative globalization indicators; (2) endogeneity based estimation; (3) adoption of two interchangeable sets of instruments; (4) estimation with a technique that controls for time-invariant unobservable shocks that affect openness and human development simultaneously. Findings – Findings broadly indicate that while trade globalization improves human development (consistent with the neoliberal theory), financial globalization has the opposite effect (in line with the hegemony thesis). The ‘life expectancy’ component of the HDI weighs most in the positive impact of trade globalization on human emancipation. Practical implications – Capital accounts should be opened in tandem with financial and institutional development. The investment atmosphere needs improvement to curtail capital flight (about 39%). Other policy implications include: adoption of openness options in a selective and gradual manner, development of some industrial backbone for an import-substitution or export-led industry, emphasis on regional trade and building capacity, development of the agricultural sector with continuous government assistance, building of rural infrastructure, increasing adult literacy rate and developing human resources, fighting corruption and mitigating wastages in government expenditure. Originality/value – These findings are based on very recent data. Usage of the inequality adjusted human development index first published in 2010, corrects past works of the bulk of criticisms inherent in the first index.

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File URL: http://www.afridev.org/RePEc/agd/agd-wpaper/Globalisation-and-Africa.-Implications-for-Human-Development.pdf
File Function: Revised version, 2013
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Bibliographic Info

Paper provided by African Governance and Development Institute. in its series Working Papers with number 12/022.

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Length: 36
Date of creation: 09 Feb 2012
Date of revision:
Publication status: Published in the International Journal of Development Issues
Handle: RePEc:agd:wpaper:12/022

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Keywords: Globalization; Human development; Africa;

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References

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  1. Greenwood, J. & Jovanovic, B., 1988. "Financial Development, Growth, And The Distribution Of Income," RCER Working Papers 131, University of Rochester - Center for Economic Research (RCER).
  2. Asongu Simplice, 2011. "Financial Determinants of Human Development in Developing Countries," Working Papers 11/012, African Governance and Development Institute..
  3. Drusilla K. Brown & Alan V. Deardorff & Robert M. Stern, 2001. "CGE Modeling and Analysis of Multilateral and Regional Negotiating Options," Discussion Papers Series, Department of Economics, Tufts University 0108, Department of Economics, Tufts University.
  4. Bhagwati, Jagdish, 1990. "Departures from Multilateralism: Regionalism and Aggressive Unilateralism," Economic Journal, Royal Economic Society, vol. 100(403), pages 1304-17, December.
  5. Simplice A, Asongu, 2010. "Bank efficiency and openness in Africa: do income levels matter?," MPRA Paper 27011, University Library of Munich, Germany.
  6. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
  7. Asongu Simplice, 2011. "Why do French civil-law countries have higher levels of financial efficiency?," Working Papers 11/011, African Governance and Development Institute..
  8. Pan-Long Tsai, 1995. "Foreign direct investment and income inequality: Further evidence," World Development, Elsevier, vol. 23(3), pages 469-483, March.
  9. Basu, Parantap & Guariglia, Alessandra, 2007. "Foreign Direct Investment, inequality, and growth," Journal of Macroeconomics, Elsevier, vol. 29(4), pages 824-839, December.
  10. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2002. "Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development," NBER Working Papers 9305, National Bureau of Economic Research, Inc.
  11. M. Sirgy & Dong-Jin Lee & Chad Miller & James Littlefield, 2004. "The Impact of Globalization on a Country's Quality of Life: Toward an Integrated Model," Social Indicators Research, Springer, vol. 68(3), pages 251-298, September.
  12. Simplice A. ASONGU, 2012. "Globalization, Financial Crisis And Contagion: Time - Dynamic Evidence From Financial Markets Of Developing Countries," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 0(2), pages 131-139, January.
  13. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2002. "Law and finance : why does legal origin matter?," Policy Research Working Paper Series 2904, The World Bank.
  14. Asongu Simplice, 2011. "Finance and Inequality: Exploring Pro-Poor Investment Channels in Africa," Working Papers 11/016, African Governance and Development Institute..
  15. Simplice A., Asongu, 2011. "Law, Finance and Investment: does legal origin matter?," MPRA Paper 34698, University Library of Munich, Germany.
  16. Simplice A., Asongu, 2011. "Law, finance, economic growth and welfare: why does legal origin matter?," MPRA Paper 33868, University Library of Munich, Germany.
  17. Simplice A., Asongu, 2011. "Law and finance in Africa," MPRA Paper 34080, University Library of Munich, Germany.
  18. Rudiger Dornbusch, 1992. "The Case for Trade Liberalization in Developing Countries," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 69-85, Winter.
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Citations

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Cited by:
  1. Asongu Simplice, 2012. "Globalization, (fighting) corruption and development: how are these phenomena linearly and nonlinearly related in wealth effects?," Working Papers 12/024, African Governance and Development Institute..
  2. Simplice A, Asongu, 2012. "Determinants of Health Professionals’ Migration in Africa," MPRA Paper 37632, University Library of Munich, Germany.
  3. Asongu, Simplice A, 2013. "Fighting African Capital Flight: Empirics on Benchmarking Policy Harmonization," MPRA Paper 48469, University Library of Munich, Germany.
  4. Asongu, Simplice A, 2013. "Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa?," MPRA Paper 46929, University Library of Munich, Germany.
  5. Asongu Simplice, 2013. "Consult your gods: the questionable economics of development assistance in Africa," Working Papers 13/002, African Governance and Development Institute..

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