Measuring the Impact of Globalization on the Well-being of the Poor: Methodology and an Application to Africa

Whereas a large number of empirical studies have been devoted to analyzing the relationship between measures of income and globalization (defined by openness to international trade), much less attention has been paid to the analysis of well-being for the various subgroups of population and their causal associations with globalization. To address this gap in the literature, this paper first analyzes the quality of life (QOL) of 'poor' and 'non-poor' population segments of 40 African countries over a period of 1980-2000, and then examines their causal association with openness to trade. In order to understand the impact of openness to trade on the well-being of poor, we assume the causal chain Openness_ Income_ Poverty_ Well-being of poor and empirically examine link by link for Africa. The first link of the chain is from openness to growth. The second link in the causal chain from openness to well-being is the interrelationship between growth and poverty. The third link of the chain is from reduction in poverty to improvement of well-being. The major findings of this paper are: First, nearly every well-being indicator declines as the poor's population share increases; second, the tendency for QOL to decline with increasing poor's population share is common to the African and non-African countries; third, women suffer a double QOL disadvantage in areas of health and education as the poor's share of population increases; and fourth, globalization has improved incomes of African countries, however, there is a no significant decline in poverty and improvement in well-being of the poor over the period. We discuss the key challenges faces by African countries to beneficially engage in the world economy.