Trade, Growth, and Poverty

The evidence from individual cases and from cross-country analysis supports the view that globalization leads to faster growth and poverty reduction in poor countries. To determine the effect of globalization on growth, poverty, and inequality, the authors first identify a group of developing countries that are participating more in globalization. China, India, and several other large countries are part of this group, so well over half the population of the developing world lives in these globalizing economies. Over the past 20 years, the post-1980 globalizers have seen large increases in trade and significant declines in tariffs. Their growth rates accelerated between the 1970s and the 1980s and again between the 1980s and the 1990s, even as growth in the rich countries and the rest of the developing world slowed. The post-1980 globalizers are catching up to the rich countries, but the rest of the developing world (the non-globalizers) is falling further behind. Next, the authors ask how general these patterns are, using regressions that exploit within-country variations in trade and growth. After controlling for changes in other policies and addressing endogeneity with internal instruments, they find that trade has a strong positive effect on growth. Finally, the authors examine the effects of trade on the poor. They find little systematic evidence of a relationship between changes in trade volumes (or any other measure of globalization they consider) and changes in the income share of the poorest-or between changes in trade volumes and changes in household income inequality. They conclude, therefore, that the increase in growth rates that accompanies expanded trade translates on average into proportionate increases in incomes of the poor. Absolute poverty in the globalizing developing economies has fallen sharply in the past 20 years. The evidence from individual cases and from cross-country analysis supports the view that globalization leads to faster growth and poverty reduction in poor countries.

Bibliographic Details

Main Authors:	Dollar, David, Kraay, Aart
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2001-06
Subjects:	ABSOLUTE POVERTY, AVERAGE GROWTH, AVERAGE GROWTH RATE, AVERAGE INCOMES, AVERAGE TARIFF, AVERAGE TARIFFS, BENCHMARK, BUSINESS CYCLES, CHANGES IN TRADE, CIVIL WAR, CLOSED ECONOMIES, CLOSED ECONOMY, CORRUPTION, COUNTRIES, COUNTRY REGRESSIONS, CROSS-COUNTRY ANALYSIS, CURRENCY, CUSTOMS ADMINISTRATION, DEMAND SHOCKS, DEPENDENT VARIABLE, DEVELOPED WORLD, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPING WORLD, DEVELOPMENT RESEARCH, DISTRIBUTION DATA, DISTRIBUTION EFFECT, DISTRIBUTIONAL EFFECT, ECONOMIC DEVELOPMENT, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIC POLICIES, ECONOMIC REFORM, ECONOMIC REFORMS, ECONOMIC SYSTEMS, ECONOMICS, ECONOMICS PROFESSION, ECONOMISTS, EMPIRICAL GROWTH LITERATURE, EMPIRICAL LITERATURE, EMPIRICAL WORK, ENDOGENOUS VARIABLES, EQUAL, EXCHANGE RATE, EXPLANATORY VARIABLES, EXPORT MARKETS, EXPORTS, FACTOR ENDOWMENTS, FINANCIAL CRISIS, FOREIGN TRADE, GDP, GINI COEFFICIENT, GROWTH DETERMINANTS, GROWTH EFFECT, GROWTH PERFORMANCE, GROWTH RATE, GROWTH RATES, GROWTH REGRESSION, GROWTH REGRESSIONS, HIGH INFLATION, HOUSEHOLD SURVEYS, IMPACT OF TRADE, IMPORT TARIFFS, IMPORTS, INCOME DISTRIBUTION, INCOME DISTRIBUTIONS, INCOME INEQUALITY, INCOME LEVELS, INCOME SHARE, INFLATION RATE, INSTITUTIONAL QUALITY, INSURANCE, INTERNATIONAL MARKETS, INTERNATIONAL TRADE, INVESTMENT RATES, LAGGED GROWTH, LIVING STANDARDS, LONG RUN, MACRO STABILITY, MEAN INCOME, MEASURE OF TRADE, MEASUREMENT ERROR, MONETARY POLICY, NATIONAL INCOME, OPEN ECONOMIES, PER CAPITA GROWTH, PER CAPITA INCOME, POINT ESTIMATE, POLICY INTERVENTIONS, POLICY VARIABLES, POLITICAL INSTABILITY, POLITICAL STABILITY, POOR COUNTRIES, POOR HOUSEHOLDS, POPULOUS COUNTRIES, POVERTY REDUCTION, PRIVATE PROPERTY, PROCESS OF CONVERGENCE, PROPERTY RIGHTS, PROTECTION MEASURES, QUOTAS, RAPID GROWTH, REAL INCOME, REDUCTION IN TARIFFS, REGRESSION ANALYSES, REGRESSION ANALYSIS, REVERSE CAUSATION, RICH COUNTRIES, RULE OF LAW, SAFETY NETS, SAFETY STANDARDS, SOCIAL PROTECTION, STATISTICAL ANALYSIS, TARIFF BARRIER, TARIFF BARRIERS, TARIFF DATA, TARIFF RATE, TARIFF RATES, TARIFF REDUCTIONS, TECHNOLOGICAL CHANGE, TRADE BARRIERS, TRADE DATA, TRADE EXPANSION, TRADE LIBERALIZATION, TRADE MORE, TRADE OPENNESS, TRADE POLICIES, TRADE POLICY, TRADE REFORMS, TRADE REGIMES, TRADE VOLUMES, TRANSITION COUNTRIES, TRANSITION ECONOMIES, TRANSPORT COSTS, UNEMPLOYMENT, VOLUME OF TRADE, WORLD TRADE, WORLD TRADE ORGANIZATION,
Online Access:	http://documents.worldbank.org/curated/en/2001/06/1981832/trade-growth-poverty http://hdl.handle.net/10986/19597
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