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Globalization and the challenge for developing countries

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  • Yusuf, Shahid

Abstract

Rsearch on the sources of growth shows several factors to be relevant to all countries, rich or poor. Whether developing countries can substantially raise per capita incomes depends on policies that address these variables: labor, human capital, capital investment in research and development, technological progress, and the increase in total factor productivity arising from scale economies, the effects of agglomeration, externalities, and institutions that secure rights and minimize transaction costs. The author argues that a comprehensive approach to globalization, managed, and abetted by good policies, can magnify the effects of growth-promoting measures. Among his observations: 1) Returns from investment in skills are much greater in a more technologically advanced and integrated economy. 2) Trade, by enlarging markets, reinforces those gains, and the option to migrate further augments the value of skills. The growing worldwide gap in income between skilled and unskilled workers suggests how much more fruitful skills are under globalization. 3) A 50 percent increase (or even a doubling) in growth rates demands a vast amount of capital, embodying modern technology and the knowledge needed to put it to best use. The international economy can be a source of such capital. 4) Openness, combined with spatially neutral domestic policies and the scaling back of regulatory constraints on domestic business activities, can unleash the full force of agglomeration economies and networking externalities, allowing industrial clusters to emerge in metropolitan regions. 5) Openness is also the best way for low-income countries to tap into technologies that will galvanize agriculture (low-income countries'economic center) and manufacturing activities and nourish indigenous technological advance. 6) No research convincingly makes the case for delaying openness or for sequencing the various elements of openness. A good case can be made for embracing all the key elements of globalization at the same time--while sequencing (where needed) the pace of integration in such areas as trade and finance.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2618.

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Date of creation: 30 Jun 2001
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Handle: RePEc:wbk:wbrwps:2618

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Keywords: Economic Theory&Research; Environmental Economics&Policies; Banks&Banking Reform; Decentralization; Fiscal&Monetary Policy; Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Banks&Banking Reform; Health Monitoring&Evaluation;

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Citations

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Cited by:
  1. Montalbano, Pierluigi & Federici, Alessandro & Triulzi, Umberto & Pietrobelli, Carlo, 2005. "Trade Openness and Vulnerability in Central and Eastern Europe," Working Paper Series RP2005/43, World Institute for Development Economic Research (UNU-WIDER).
  2. Heshmati, Almas, 2004. "The Relationship between Income Inequality, Poverty and Globalisation," IZA Discussion Papers 1277, Institute for the Study of Labor (IZA).
  3. Agenor, Pierre-Richard, 2001. "Benefits and costs of international financial integration : theory and facts," Policy Research Working Paper Series 2699, The World Bank.
  4. Branko Milanovic, 2003. "Can We Discern The Effect Of Globalization On Income Distribution? Evidence From Household Surveys," HEW 0310002, EconWPA.
  5. Wouterse, Fleur & Taylor, J. Edward, 2008. "Migration and Income Diversification:: Evidence from Burkina Faso," World Development, Elsevier, vol. 36(4), pages 625-640, April.
  6. Wouterse, Fleur S., 2008. "Migration and technical efficiency in cereal production: Evidence from Burkina Faso," IFPRI discussion papers 815, International Food Policy Research Institute (IFPRI).
  7. Saadaoui, Zied, 2007. "L’intégration financière internationale :Une comparaison descriptive des effets sur les pays industrialisés et les pays émergents
    [International financial integration: A descriptive compariso
    ," MPRA Paper 25330, University Library of Munich, Germany.
  8. John Luiz & Harry Charalambouse, 2009. "Factors Influencing Foreign Direct Investment of South African Financial Services Firms in Sub-Saharan Africa," Working Papers 118, Economic Research Southern Africa.
  9. Wouterse, Fleur, 2012. "Migration and Rural Welfare: The Impact of Potential Policy Reforms in Europe," World Development, Elsevier, vol. 40(12), pages 2427-2439.
  10. Istvan Konya & Hiroshi Ohashi, 2004. "Globalization and Consumption Patterns among the OECD Countries," Boston College Working Papers in Economics 596, Boston College Department of Economics.
  11. Ziv Chinzara & Radhika Lahiri, 2012. "Economic growth and inequality patterns in the presence of costly technology adoption and uncertainty," School of Economics and Finance Discussion Papers and Working Papers Series 280, School of Economics and Finance, Queensland University of Technology.
  12. Aktas, Erkan, 2006. "Küreselleşme, Yoksulluk ve Genetiği Değiştirilmiş Tarım Ürünleri
    [Globalisation, Powerty and Genetically Modified Agricultural Product]
    ," MPRA Paper 8657, University Library of Munich, Germany, revised 2006.

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