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

  • Asongu, Simplice A.

    ()

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

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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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
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  1. Asongu Simplice, 2011. "Law, Democracy and the Quality of Government in Africa," Working Papers 11/018, African Governance and Development Institute..
  2. M. Ayhan Kose & Eswar S. Prasad & Ashley D. Taylor, 2009. "Thresholds in the Process of International Financial Integration," NBER Working Papers 14916, National Bureau of Economic Research, Inc.
  3. 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.
  4. Asongu Simplice, 2011. "Finance and Inequality: Exploring Pro-Poor Investment Channels in Africa," Working Papers 11/016, African Governance and Development Institute..
  5. 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.
  6. Alexander Cobham, . "Capital Account Liberalisation and Poverty," QEH Working Papers qehwps70, Queen Elizabeth House, University of Oxford.
  7. Asongu Simplice, 2011. "Investment and Inequality in Africa: which financial channels are good for the poor?," Working Papers 11/015, African Governance and Development Institute..
  8. M Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 8-62, April.
  9. 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.
  10. Philip Arestis & Asena Caner, 2008. "Capital Account Liberalization and Poverty: How Close is the Link?," Working Papers 0811, TOBB University of Economics and Technology, Department of Economics.
  11. 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 191-99, May.
  12. 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.
  13. Hisako KAI & Shigeyuki HAMORI, 2009. "Globalization, Financial Depth, and Inequality in Sub-Saharan Africa," Discussion Papers 0912, Graduate School of Economics, Kobe University.
  14. Asongu Simplice, 2012. "Globalization and Africa: implications for human development," Working Papers 12/022, African Governance and Development Institute..
  15. Peter Blair Henry, 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," NBER Working Papers 12698, National Bureau of Economic Research, Inc.
  16. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
  17. Asongu Simplice, 2012. "Financial development dynamic thresholds of financial globalization: evidence from Africa," Working Papers 12/020, African Governance and Development Institute..
  18. Michael Enowbi-Batuo & Mlambo Kupukile, 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, May.
  19. Asongu, Simplice A, 2013. "How has politico-economic liberalization affected financial allocation efficiency? Fresh African evidence," MPRA Paper 44995, University Library of Munich, Germany.
  20. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers 07-004, Stanford Institute for Economic Policy Research.
  21. 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 109-21, April.
  22. Sindzingre, Alice, 2005. "Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective," Working Paper Series RP2005/53, World Institute for Development Economic Research (UNU-WIDER).
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