Globalization, Growth and Poverty David Dollar Development Economics World Bank.

Globalization, Growth and

Poverty

David DollarDevelopment EconomicsWorld Bank

Globalization and Poverty

“…all the main parties support nonstop expansion in world trade and services although we all know it … makes rich people richer and poor people poorer…”

– Walter Schwarz, The Guardian

President Fox on Globalization

“We are convinced that globalization is good and it’s good when you do your homework… keep your fundamentals in line on the economy, build up high levels of education, respect rule of law… when you do your part, we are convinced that you get the benefit.”

ZambiaEgyptNigeriaSenegalHondurasTogoKenyaPakistan

BrazilIndia

ThailandBangladesh

MalaysiaPhilippinesArgentina

MexicoChina

-100 0 100Percent change

Change in trade/GDP, 1977-97(selected countries)

Developing country exportshave shifted toward manufactures

0

20

40

60

80

Agriculture

Minerals

Manufactures

1965 1970 1975 1980 1985 1990 1995

Share

Increase in trade/GDP: 1970s to 1990s

0%

25%

50%

75%

100%

Non-globalizers Rich countries Globalizers

-18%

71%

104%

Growth in globalizers accelerated as integration proceeded

1.4%

2.9%

3.5%

5.0%

0%

2%

4%

6%

1960s 1970s 1980s 1990s

Convergence and divergence in the 1990s

-1%

2%

5%

2%

4%

6%

Less globalized countries

Rich countries More globalized countries

GDP per capita growth rates, 1990s (ppp)

0

Poverty reduction in Bangladesh, India, Uganda, Vietnam, and China closely related to growth

Percent per annum, 1992-98

3.3*

4.43.8

6.4

9.9

0

2

4

6

8

10

Bangladesh India Uganda Vietnam China

GDP per capita growth rate

2.1*

5.4**5.9

7.5

8.4Poverty reduction

* Bangladesh figures are for 1992-2000 ** India figures are for 1993-99

20%

30%

40%

6.54 6.64 6.74 6.84 6.94 7.04 7.14 7.24 7.34 7.44 7.54

Per capita household consumption 1993 (log scale)

Share of 6-15 year olds working

1993

1998

Child labor and household consumption levels in Vietnam

Poor countries that globalized have seen the fastest growth in wages

0

10

20

30

Less globalizedcountries

Rich countries More globalized countries

Wage growth between 1980s and 1990s (percent)

Maritime transport to the U.S. (East Coast): textiles

Mombasa Bombay Shanghai Bangkok Kao Hsiung

Costs as share of value of exports

(8,452) (10,319) (11,222) (10,631)

0

0.04

0.08

0.12

0.16

(8,360)

Quantifying bottlenecks: Days to clear imported inputs through customs

0

4

8

1210.6

7.0 7.0

India Korea Thailand

6.7

21.0

9.210.6

0

10

20

India Shanghai

Last timeLongest

7.8

China

Uttar Pradesh

West Bengal

Kerala

Delhi Punjab

Tamil Nadu

Karnataka Andhra Pradesh

Gujarat Maharashtra

Investment rate (percentage), 1999

-4

-2

0

2

4

6

8

10

GoodPoorInvestment climate by state

Investment climate makes a big difference

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000

800

1,000

1,200

1,400Number of people living on less than $1 per day (millions)

Poverty has dropped by 200 million over past 20 years, despite world population increased of 1.6 billion.

Number of very poor has fallen since 1980

Globalization: Agenda for Action

• “Development round” on market access

• Improving the investment climate

• Strengthening education, health and social protection

• More – and better – aid (including debt relief)