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Inequality, poverty and quality of institutions: which freedom channels of globalization matter for Africa?

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Listed author(s):
  • Asongu, Simplice A.

    ()

    (African Governance and Development Institute, P.O. Box 18 SOA/ 1365 Yaoundé, Cameroon)

Abstract

Are formal institutions instrumental in the effect globalization mechanisms have on the human face? If so, through which freedoms channels are poverty and inequality mitigated? With the instrumentality of formal institutions: (1) de jure financial liberalization (KAOPEN) has a positive income-redistribution impact while the de facto measure (FDI) does not; (2) political liberalization has a disequalizing effect and; (3) economic freedom has a positive (negative) effect on inequality (poverty). Hence, economic freedom does not stop the wealthy from growing wealthier, but at the same time provides for conditions that mitigate poverty. The findings broadly show that, despite the substantially documented negative incidences of some channels of globalization on poverty (and inequality), formal institutions have the capacity to device policies that will give capital openness, trade and economic liberalizations a human face. Social implications and policy options are discussed.

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File URL: http://eelet.org.uk/EEL2(1)24-31.pdf
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Article provided by European Economics Letters Group in its journal European Economic Letters.

Volume (Year): 2 (2013)
Issue (Month): 1 ()
Pages: 24-31

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Handle: RePEc:ris:eueclt:0010
Contact details of provider: Web page: http://www.eelet.org.uk/

Keywords: Globalization; Inequality; Poverty; Formal institutions; Africa;

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Find related papers by JEL classification:
  • F30 - International Economics - - International Finance - - - General
  • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
  • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
  • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
  • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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  1. Simplice A., Asongu, 2011. "Finance and inequality: exploring pro-poor investment channels in Africa," MPRA Paper 34994, University Library of Munich, Germany.
  2. Hisako Kai & Shigeyuki Hamori, 2009. "Globalization, financial depth, and inequality in Sub-Saharan Africa," Economics Bulletin, AccessEcon, vol. 29(3), pages 2025-2037.
  3. Simplice A. Asongu, 2013. "Investment And Inequality In Africa: Which Financial Channels Are Good For The Poor?," The African Finance Journal, Africagrowth Institute, vol. 15(2), pages 43-65.
  4. Peter Blair Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Journal of Economic Literature, American Economic Association, vol. 45(4), pages 887-935, December.
  5. Philip Arestis & Asena Caner, 2010. "Capital account liberalisation and poverty: how close is the link?," Cambridge Journal of Economics, Oxford University Press, vol. 34(2), pages 295-323, March.
  6. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
  7. Cho, Yoon Je, 1986. "Inefficiencies from Financial Liberalization in the Absence of Well-Functioning Equity Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 18(2), pages 191-199, May.
  8. Asongu Simplice, 2012. "Globalization and Africa: implications for human development," Working Papers 12/022, African Governance and Development Institute..
  9. Alexander Cobham, "undated". "Capital Account Liberalisation and Poverty," QEH Working Papers qehwps70, Queen Elizabeth House, University of Oxford.
  10. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 143-197, June.
  11. Simplice A Asongu, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," Economics Bulletin, AccessEcon, vol. 33(1), pages 663-676.
  12. Ayhan Kose, M. & Prasad, Eswar S. & Taylor, Ashley D., 2011. "Thresholds in the process of international financial integration," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 147-179, February.
  13. Federico Varese, 1997. "The Transition to the Market and Corruption in Post-socialist Russia," Political Studies, Political Studies Association, vol. 45(3), pages 579-596.
  14. Menzie D. Chinn & Hiro Ito, 2002. "Capital Account Liberalization, Institutions and Financial Development: Cross Country Evidence," NBER Working Papers 8967, National Bureau of Economic Research, Inc.
  15. Simplice A, Asongu, 2011. "Law, democracy and the quality of government in Africa," MPRA Paper 35502, University Library of Munich, Germany.
  16. Simplice Asongu, 2014. "Financial development dynamic thresholds of financial globalization: Evidence from Africa," Journal of Economic Studies, Emerald Group Publishing, vol. 41(2), pages 166-195, March.
  17. Joshua Aizenman & Reuven Glick, 2009. "Sterilization, Monetary Policy, and Global Financial Integration," Review of International Economics, Wiley Blackwell, vol. 17(4), pages 777-801, 09.
  18. Arestis, Philip, et al, 2002. "The Impact of Financial Liberalization Policies on Financial Development: Evidence from Developing Economies," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 109-121, April.
  19. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
  20. Michael Enowbi-Batuo, 2010. "How can economic and political liberalisation improve financial development in African countries?," Journal of Financial Economic Policy, Emerald Group Publishing, vol. 2(1), pages 35-59, April.
  21. Sindzingre, Alice, 2005. "Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective," WIDER Working Paper Series 053, World Institute for Development Economic Research (UNU-WIDER).
  22. Enowbi Batuo, Michael & Guidi, Francesco & Mlambo, Kupukile, 2010. "Financial Development and Income Inequality: Evidence from African Countries," MPRA Paper 25658, University Library of Munich, Germany.
  23. Asongu Simplice, 2013. "Globalization and Africa: implications for human development," International Journal of Development Issues, Emerald Group Publishing, vol. 12(3), pages 213-238, September.
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Cited by:

  1. Simplice A Asongu, 2014. "On the substitution of institutions and finance in investment," Economics Bulletin, AccessEcon, vol. 34(3), pages 1557-1574.
  2. Asongu, Simplice A., 2013. "How do institutions matter in the income-equalizing effect of mobile phone penetration?," European Economic Letters, European Economics Letters Group, vol. 2(2), pages 56-61.

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