Towards the Reversal of Poverty and Income Inequality Setbacks Due to COVID-19: The Role of Globalisation and Resource Allocation

Abstract

Policy recommendations for building resilient and all-inclusive societies post COVID-19 pandemic continue to dominate the media and research landscapes. However, rigorous empirical content backing such claims, particularly, on both poverty and income inequality, is hard to find. Motivated by the bleak outlook of the Middle East and North Africa (MENA) region, as driven primarily by the floundering hydrocarbon sector, vulnerable employment, and low foreign direct investment, we analyse the poverty and income inequality effects of globalisation and resource allocation in the region. Using data from the World Bank's Poverty and Equity Database for the period 1990-2019, we provide estimates robust to several econometric techniques the pooled least square, fixed effect, random effect, and the system generalized method of moments estimators to show that: (1) while economic globalisation reduces both poverty and income inequality, social globalisation matters only for income inequality in MENA; (2) economic globalisation is remarkable in reducing income inequality through resource allocation. Policy recommendations are provided in the light of the geopolitical fragility and rise in social globalisation of the region.

Crecimiento económico y condiciones sociales de la población considerada pobre o de mayor vulnerabilidad en el Perú

“…Using Pearson's r correlation coefficient, a high relation can be seen between monthly per capita income and GDP, which exceeds 70% on average. However, this type of result is not evident in the amount obtained by the most vulnerable population, whose income does not cover a basic family basket, which explains that the macroeconomic results, if not effectively distributed, do not cause substantial changes in poverty indicators, which is also pointed out by Murphy (2022), Coppelli Ortiz (2018) and Ofori et al (2021), authors who intertwine the economy with social results, where the market's supposed benefits have not been able to close poverty gaps.…”

“…An interesting analysis concerning this point is explained by Coppelli Ortiz (2018), who mentions the benefits of economic globalization and points out the direct incidence that socio-economic effects have on a country's economy (p. 14). However, Ofori et al (2021) are more cautious when intertwining globalization with poverty and explain that the first one exposes nations to financial ruin (p. 5). In this sense, although there is no doubt that the phenomenon of globalization has generated important monetary benefits, it has not been integrating nor inclusive.…”