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Globalization and the Human Development Trap

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  • Mayer-Foulkes, David

Abstract

The feeble results of liberalization policies in Latin America are explained in terms of a multiple steady state model including a dynamic human development trap, endogenous technological change, technology transfer and trade. Divergent and convergent steady states, with and without a human development trap, exist under both autarchy and free trade. The model explains why import substitution is inferior to export promotion. While globalization is a necessary condition for convergence to development, it is not sufficient. Both trade and foreign direct investment create innovation assymetries hindering lagging countries that need to be balanced with export promotion and technological transfer for their successful integration with the global economy. In addition, so long as the human development trap persists, unskilled and skilled workers will have a conflict of interest between supporting human capital investment and innovation. If only innovation is supported, the human capital trap will persist. If mainly human capital investment is pursued, technology levels will fall behind; switching to innovation will be necessary eventually. The world growth rate is maximized by regulating globalization so as to attain development in all countries.

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File URL: http://www.wider.unu.edu/stc/repec/pdfs/rp2007/rp2007-64.pdf
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Bibliographic Info

Paper provided by World Institute for Development Economic Research (UNU-WIDER) in its series Working Paper Series with number UNU-WIDER Research Paper RP2007/64.

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Length: 30 pages
Date of creation: 2007
Date of revision:
Handle: RePEc:unu:wpaper:rp2007-64

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Keywords: trade; investment; technology;

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Cited by:
  1. Sapkota, Jeet Bahadur, 2011. "Impacts of globalization on quality of life: evidence from developing countries," MPRA Paper 37506, University Library of Munich, Germany.
  2. Mayer-Foulkes, David, 2008. "The Human Development Trap in Mexico," World Development, Elsevier, vol. 36(5), pages 775-796, May.
  3. David Mayer-Foulkes, 2012. "FDI, Polarized Globalization, and the Current Crisis," DEGIT Conference Papers c017_052, DEGIT, Dynamics, Economic Growth, and International Trade.

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