Reviving the Globalization and Poverty Debate: Effects of Real and Financial Integration on the Developing World

Abstract

Around the turn of this century there were concerns about the possible adverse effects of globalization which led to a polarized debate on the plight of the world's poorest. This paper attempts to answer the question of whether or not the billions of people who still live on less than $1 a day are sharing in the benefits of greater integration among economies. The first part of the paper summarizes the channels and transmission mechanisms, such as greater openness to trade and foreign investment, through which the process of globalization could affect poverty in the developing world. Using a panel data of 35 developing countries from 1990 to 2004 an empirical examination is carried out of the impact of real and financial integration on the head count ratio and poverty gap. Results suggest that, on an aggregate level, capital flows via FDI have had an adverse effect and real trade-induced income growth had a favorable effect on the incidence of poverty. On the other hand, a policy of excessive openness to external trade without complementary support mechanisms was found to be negatively related to the depth of poverty in developing countries.

Does Economic Growth Mediate Investment, Inflation, and Human Development Investment on Poverty in Indonesia?

“…This fact is interesting because theoretically when investment increases it has an impact on reducing poverty, but the regression result from the tested variables revealed a different condition where investment showed no impact on poverty reduction. This result is following the research conducted by Ali and Nishat (2009) in Pakistan, Ogunniyi and Igberi (2014) in Nigeria, Bharadwaj (2014) and Huang et al (2010) that found that FDI inflows had a negative impact on poverty.…”

An estimation of the macroeconomic determinants of income poverty in Pakistan? Evidence from a non‐linearARDLapproach

“…The second group contains the studies which show that poverty increases as the inflow of FDI increases (Huang et al, 2007; Khan et al, 2010). The third group consists of those studies which deduce that FDI plays a significant role to reduce the poverty (Bharadwaj, 2014; Calvo & Hernandez, 2006; Fowowe & Shuaibu, 2014; Hung, 2005; Israel, 2014; Jalilian & Weiss, 2002; Magombeyi & Odhiambo, 2018; Mahmood & Chaudhary, 2012; Reiter & Steensma, 2010; Soumaré, 2015; Ucal, 2014; Uttama, 2015). In a relevant study on 98 developing countries, Dhrifi et al (2020) found evidence of high FDI inflows resulting in lower poverty levels.…”

Nexus between Foreign Direct Investment and Poverty Reduction: A case of Pakistan

“…The results of these studies are inconclusive, FDI and poverty were found insignificant in some empirical analyses, and others have revealed that FDI is significantly contributing to poverty reduction. Various empirical research such as Hung (2005); Jalilian and Weiss (2002) found that FDI has a positive impact on poverty reduction; similarly findings of these studies of Bharadwaj (2014); Calvo and Hernandez (2006); Fowowe and Shuaibu (2014); Gohou and Soumaré (2012);Israel ;Mahmood and Chaudhary (2012); Reiter and Steensma (2010); Shamim, Azeem, and Naqvi (2014); Soumaré (2015); Ucal (2014); Uttama (2015); Zaman, Khan, and Ahmad (2012) found the same results as mentioned in the introduction of the study that millennium development goals aim to overcome the problem of poverty by identifying those factors which can be helpful in this regard. Mirza et al (2004) explored that empirical analysis depends on developed and developing countries and found that FDI has significantly contributed to poverty reduction.…”