Globalization and Poverty Forthcoming, University of Chicago Press Ann Harrison, editor (UC Berkeley and NBER) www.nber.org/books/glob-pov.

Slides:



Advertisements
Similar presentations
Trade and Inequality Nina Pavcnik Dartmouth College BREAD, CEPR, and NBER WTO-ILO Conference Research on Global Trade and Employment.
Advertisements

INTERAMERICAN DEVELOPMENT BANK Integration and Trade Sector The trade and poverty nexus in Latin America LATN Plenary Meeting Buenos Aires - November 17,
Sharing experiences between Asia and the Pacific and Western and Central Africa Achieving the Millennium Development Goal of Halving Poverty by 2015 Sharing.
The Institute for Economic and Social Research University of Indonesia
Dileni Gunewardena  Department of Economics and Statistics University of Peradeniya  Sri Lanka Growth and poverty dynamics.
Agricultural Economics
AGRICULTURAL TRADE AND FOOD SECURITY: IMPLICATIONS FOR TRADE POLICY AND DEVELOPMENT GOALS Jonathan Brooks, OECD IDDRI Workshop, 29th January 2014.
Trade Policies, Household Welfare and Poverty Alleviation Book Launch Nina Pavcnik Dartmouth College UNCTAD, September 8, 2014.
1 Chapter 10 Growth, Poverty, and Income Distribution: Some Basic Facts © Pierre-Richard Agénor The World Bank.
Rethinking Alternative Growth Paradigms  Mah-Hui LIM  South Centre Conference on The South in the Global Economic Crisis, Geneva  January 31,
Lusaka, 1 December 2010 Public Expenditure Review Workshop.
Employment and Development: Good Jobs and Bad Jobs Turin, Monday, May 22, 2006 François Bourguignon Senior Vice President and Chief Economist The World.
1 Agriculture and Development By Aleksandra Olszewska Emanuel Ules.
Sub-Saharan Africa Class 3. Internalist Perspective Central Thesis African governments have intervened to shift internal terms of trade against farmers.
Sources of Comparative Advantage
México Julieta Dorantes Maria Porto. Agenda. Mexico: General information about the country. Mexican Industry: quick review. Industrial Policy: what are.
Dr Maurice Mullard Lecture 5.  World Bank and UN argument that global is good for the poor  World Bank yardstick of $1 a day to measure poverty – see.
Nations Have Different Economic Outcomes
Inequality and Poverty in Mexico: Nora Lustig Samuel Z. Stone Professor of Latin American Economics Tulane University New Orleans, November 17,
Sara Hsu.  Poverty measurement has changed from one of relative income gaps to multidimensional indices of poverty.  Poor are socially constructed phenomenon.
Labor Markets, Globalization and Poverty Ann Harrison UC Berkeley and NBER World Bank March 23, 2006.
The Global Food Security Challenge ( GLDN for ECA, Dec 18th.
Linkages between Nepalese Agriculture and Poverty Reduction Krishna Prasad Pant, Ph. D. November 11, 2005.
McGraw-Hill/Irwin © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. The U.S. Economy: A Global View Chapter 2.
1 Enhancing the Development Impact of Migration: Issues and Policy Options Mr. Luca Barbone World Bank February 5, 2009.
Round Table Discussion - Trade and Global Poverty: Wages L Alan Winters University of Sussex, CEPR, IZA, GDN.
INCLUSIVE GROWTH AND POLICIES: THE SOUTH ASIAN EXPERIENCE Thangavel Palanivel Chief Economist for Asia-Pacific UNDP, New York.
Directorate for Food, Agriculture and Fisheries ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT ORGANISATION DE COOPÉRATION ET DE DEVELOPMENT ÉCONOMIQUES.
Institutional Learning and Change Initiative of the CGIAR 1 The new dynamics of poverty and the role of science in poverty alleviation Javier M. Ekboir.
Copyright ©2002, South-Western College Publishing International Economics By Robert J. Carbaugh 8th Edition Chapter 1: The International Economy.
Globalization: The Ups and Downs of Globalization or World economic integration Globalization: The Ups and Downs of Globalization or World economic integration.
Problems with Neoliberalism Introduction Neoliberalism’s “success stories” Neoliberalism’s prescription  Fiscal austerity  Privatization  Trade liberalization.
Poverty and the WTO: Impacts of the Doha Development Agenda Thomas W. Hertel and L. Alan Winters Purdue University and Development Research Group, The.
Lessons and implications for agriculture and food Security in the region IFPRI-ADB POLICY FORUM 9-10 August 2007 Manila, Philippines Rapid Growth of Selected.
Distributional Effects of Trade Policy Inmaculada Martínez-Zarzoso University of Göttingen (Germany) and University Jaume I (Spain)
Pro Poor Growth Manmohan Agarwal Centre for International Governance Innovation* * This research is part of a research project supported by the ORF.
Agricultural Trade and Poverty Reduction in Nepal Dr. Shiva Sharma National Labour Academy Presented in Media Workshop, "Role.
Developing Countries and Globalization Lecture 20.
PART TWO: Distribution and Human Resources
Inclusive Growth Dynamics and Determinants in Emerging Markets *
ECON Poverty and Inequality. Measuring poverty To measure poverty, we first need to decide on a poverty line, such that those below it are considered.
John Panzer World Bank February 2007 Global Economic Prospects, 2007 Managing the Next Wave of Globalization in North Africa.
1 I. International Trade and development Raul Caruso Università Cattolica del Sacro Cuore di Milano
Methodology of Examining the Nexus between Trade Liberalization, Growth and Poverty: Some Thoughts Dr. Selim Raihan Assistant Professor Department of Economics.
Trade Liberalization and Poverty The Linkages Institute of Development Studies and World Bank Jakarta L. Alan Winters Neil McCulloch Andy McKay.
Growth and Poverty Reduction: Latin American Experience with Economy-wide Policies Alberto Valdés Taking Action for the World’s Poor and Hungry People.
Global Income Distribution and Poverty in the Absence of Agricultural Distortions Maurizio Bussolo, Rafael E. De Hoyos, and Denis Medvedev The World Bank.
Globalization, Trade, Investment, and Environment Session Objectives: l Debate risks and opportunities of economic globalization l Identify SD requirements.
6/3/ The U.S. in the Global Economy Chapter 5.
1 CHAPTER 2:TRADE AND WAGES 2A: Standard trade theory 2B: Empirical evidence 2C: Outsourcing and wages 2D: More recent advances Globalisation and labour.
1 Globalization is Good First Lecture for International Trade Policy Craig Parsons 2012.
Comments on “Economies with a Large Labor Force” Ann Harrison UC Berkeley, IGC, and NBER September 27, 2011.
The Developing Countries’ Emerging Role in the Global Market Robert L. Thompson Chairman International Food & Agricultural Trade Policy Council 24 May.
Nicaragua: agriculture in a Liberalization context Early stages of integration to global networks.
McGraw-Hill/Irwin ©2008 The McGraw-Hill Companies, All Rights Reserved The U.S. Economy: A Global View Chapter 2.
Trade Liberalization and Labor Market in Brazil Rio de Janeiro, April 24, 2006 Jorge Arbache World Bank and University of Brasilia.
Essay Skills 2 nd attempt!. Olde Edexcel Essay style! Feb 2010 UNIT 6 paper. 1. (a) Assess the impact on the world economy of the growth of regional trade.
Eric Wailes and Alvaro Durand-Morat University of Arkansas, Division of Agriculture Impacts of WTO Policy on U.S. Rice Policy.
Why Isn’t Mexico Rich? G ORDON H ANSON UC S AN D IEGO AND NBER.
GROWTH AND INEQUALITY in Indonesia Mohammad Faisal CORE Indonesia (Center of Reform on Economics)
Discussion of Indonesian National Report : A Socio-economic and Policy Analysis of the Roles of Agriculture in Indonesia.
1. Low living standards 2. Low levels of labour productivity 3. High rate of population growth 4. Economic structure dominated by primary sector production.
Marketing margins and trade policy reform
Trade Policy in Developing Countries
Improved market access for Russia or own liberalization as part of WTO accession: What will raise Russian income and reduce poverty more?                     
Globalization is Good, Protection is Bad
Rural-urban Migration and Poverty in Kenya: is Agriculture the Answer?
Global Economic Prospects, 2007
Trade Policy in Developing Countries
Dr. Selim Raihan Assistant Professor Department of Economics
Presentation transcript:

Globalization and Poverty Forthcoming, University of Chicago Press Ann Harrison, editor (UC Berkeley and NBER)

NBER Study: What is the relationship between globalization and poverty? Definition of globalization – trade (tariffs/trade shares) – capital flows (foreign investment, aid, capital flows) 15 papers –Theory (from Globalization to Poverty) –Cross-country evidence –Country case studies based on micro data –Concerns of globalization’s critics (Aisbett) Policy Implications

Increasing Integration of Developing Countries (Export Shares of GDP)

While trade integration has increased, the incidence of poverty has declined (but not necessarily the absolute number of poor) 1998 Headcount (bill.) 1998 Inciden ce (%) Ave. Change in Headcount (mill. p.a.) Ave. Change in Incidence (% p.a.) Poverty Line ($/day) Source Chen & Ravallion (2000) Chen & Ravallion (2000) Chen & Ravallion (2004) Chen & Ravallion (2004) Sala-i-Martin (2002a) Sala-i-Martin (2002a) Bhalla (2003) Bhalla (2003)

Summarizing: In the last 2 decades, the percentage of the population living on less that 1 dollar a day fell from 40 to 22 percent During this period, developing countries increased their trade shares and slashed their tariffs. To what extent is increasing globalization responsible for the fall in the incidence of poverty?

Five cross-country studies Two studies show that openness is associated with higher inequality in poor countries (Milanovic and Squire, Easterly) Financial integration is associated with higher consumption volatility for less financially developed countries (Prasad, Rogoff, Wei, and Kose) OECD agricultural subsidies and LDC incomes (Ashraf, McMillan, and Zwane) Relationship between openness, growth, and poverty reduction (Harrison)

Ashraf, Mcmillan, and Zwane on Agricultural support “Macro” angle: measure impact of OECD support policies on country incomes, distinguishing between food importers and exporters “Micro” angle: measure impact on Mexican corn farmers of liberalizing trade with USA Results: agricultural support in rich countries helped most poor countries, because most poor countries are net food importers! Hurts only countries that export primarily food

Direct Linkages between globalization and poverty outcomes (Harrison ) I test for the following linkages: (1)Openness (tariffs or trade shares) and Growth (2) Growth and poverty. Poverty defined two ways: - Percentage of households living on < 1 or 2 PPP dollars per day - Income of poorest decile or quintile (3) Openness and poverty

Results:  Openness associated with growth  Biggest driver of poverty reduction is growth (“Growth is good for the poor”)  Very weak direct association between openness and poverty outcomes  Why? Two possibilities: –Negative impact on poor offset gains from growth due to openness? –Poor data? –Turn next to country studies

WRONGRIGHT: Shows NO Relationship between Trade Policy and Poverty

Country Case Studies Using Household Data India (Topalova) Colombia (Goldberg and Pavcnik) Ethiopia (McMillan and Levinsohn) Mexico ( Ashraf, McMillan, Peterson-Zwane; Hanson) Zambia (Balat and Porto) South Africa (Levinsohn) China (Ligon, Wei) Poland (Goh and Smarzynska) Indonesia (Thomas)

Results 1.Simple conclusions based on orthodox interpretations of trade models misleading 2.Heterogeneity in responses makes generalization difficult (and careful targeting necessary) 3.BUT generally true that poor in expanding sectors gain 4.Poor in previously protected sectors lose (suggesting need for social support programs) 5.Financial Integration: DFI and Aid help the poor, while currency crises hurt the poor 6.Bundling trade reform with complementary policies likely to result in more positive relationship between trade and poverty reduction

1. Simple conclusions based on orthodox interpretations of trade models misleading “Orthodox” view: in countries with a comparative advantage in exporting unskilled-intensive goods, unskilled or poor will gain more from trade than skilled workers (Anne Krueger, Jagdish Bhagwati) Why is this framework incorrect? Workers cannot easily relocate to expanding sectors Countries protect sectors that use unskilled workers Exporters/foreign firms use skilled labor even in unskilled- labor rich countries Getting goods produced by poor (or using their labor) to global markets requires many complementary policies (infrastructure, human capital development etc)

Exporters and foreign firms use skilled labor even in unskilled-labor rich countries

Getting goods produced by poor (or using their labor) to global markets requires many complementary policies…..

2. Heterogeneity in responses makes generalization difficult Mexico: large corn farmers gain, small corn farmers lose (from US corn imports) India: tariff reductions associated with slower rate of poverty reduction BUT –Only true in regions with restrictive labor laws –No impact on poverty reduction in regions with mobile labor

3. BUT generally true that poor in expanding sectors gain Unskilled in countries with a comparative advantage in exporting unskilled intensive goods to rich countries (Poland) Poor wage earners in sectors receiving DFI (Mexico, India, Poland) Poor wage earners in sectors with export growth (Mexico, India, Poland, Colombia)

Study on Mexico (Hanson) Divides Mexico into two “high globalization” and “low globalization” regions based on imports, proximity to USA, and FDI Examines changes in both the level of wage income and the entire distribution of income, focusing on the left-hand side tails (the poor) Finds that both wage levels and the poor fared better in the more globalized regions

4. Poor in previously protected sectors lose The poor in urban sectors with tariff reductions (Colombia) Small farmers competing with higher imports (small corn farmers in Mexico) Rural agricultural labor restricted from relocating due to rigid labor laws (India)

Study on India (Topalova) Trade reforms post-1991 coincide with significant poverty reduction Regress district level outcome on a district-level measure of trade exposure: Y dt = a + b*Tariff dt + c*FDIreforms +d t + e d + ε dt Outcomes Y dt include proportion of population below poverty line, poverty gap, and inequality (std of log consumption) Finds negative and significant coefficient b, implying tariff declines increase poverty in rural areas (b is between -.2 and -.8) Coefficient on FDI < 0, implying FDI helps poor.

5. Financial Integration: DFI and Aid help the poor, while currency crises hurt the poor Foreign investment reduces poverty (India, Mexico) Food aid benefits the poor, who are net consumers (rather than net producers) of agricultural goods (Ethiopia) Currency crises, premature capital account liberalization costly to the poor (Prasad et al, Indonesian case study) Global financial integration associated with higher consumption volatility for less developed economies

Importance of Complementary Policies –Lack of labor mobility impedes adjustment. Workers need assistance moving from contracting (import- competing) to expanding (exporting) sectors –Exporters need educated workers even in labor-rich countries –Lack of complementary inputs (infrastructure, technology, credit) inhibits movements from subsistence agriculture to cash crops –Lack of domestic institutions, rule of law, capital market development restricts gains from access to international capital markets Income support—carefully targeted—can be an important safety net Market access to developed country markets critical (agriculture, textiles) 6. Bundling trade reform with complementary policies more likely to lead to gains for poor

Conclusions Trade integration associated with higher growth, growth associated with poverty reduction, but no evidence of significant link between trade and poverty Trade and financial integration associated with rising inequality, higher consumption volatility in poor countries Simple interpretations of orthodox trade models need to be abandoned Poor in expanding (FDI/exporting) sectors gain Financial crises hurt the poor Poor in contracting (import-competing) sectors lose— largely a consequence of labor immobility Complementary policies are critical: trade policy is part of a “package” of successful policies.