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Global Implications of U.S. Trade Policies for Reducing Structural Trade Imbalances Read chapter Read first chapter

2018 | OriginalPaper | Chapter

Globalization and Inclusive Growth: Can They Go Hand in Hand in Developing Countries?

Authors : Rupa Duttagupta, Sandra Lizarazo Ruiz, Angelica Martinez Leyva, Marina Mendes Tavares

Published in: Getting Globalization Right

Publisher: Springer International Publishing

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Abstract

Low-income developing countries (LIDC) have experienced a rapid increase in economic integration since the early 1990s. This chapter builds a dynamic general equilibrium model that captures important structural characteristics of LIDCs—a large agriculture sector, productivity gaps, and limited financial inclusion—to identify the channels through which integration can affect inclusive growth. The model is used to quantify the growth and distributional effects of the economic and financial liberalization in Ghana in the early 1990s. The results suggest that liberalization contributed significantly to Ghana’s growth take-off and poverty alleviation in 1990–2000. However, with limited labor mobility and persistent skill gaps between sectors, the benefits of integration, particularly from the financial liberalization channel, are concentrated in households with more human capital and access to finance, resulting in higher income inequality.

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Appendix
Available only for authorised users
Footnotes
1
See IMF-World Bank-WTO, 2017 for a summary of the literature, and the references therein.
 
2
For a definition of LIDCs, see International Monetary Fund (2014).
 
3
The KOF index (Dreher 2006) and its sub-components measure three main dimensions of globalization based on both, de jure restrictions and de facto flows: economic, social, and political globalization. Figure 2 (left panel) uses the overall index.
 
4
When the sample is further split into the 1990s and 2000s, the relationship between trade, per-capita income and structural transformation is much stronger in the former period, possibly reflecting the decreasing marginal returns from additional integration (see Lang and Tavares Forthcoming). Note that the Figure demonstrates the relationship between higher openness, income gains and structural transformation for Ghana with a (red) square marker in the scatter plots.
 
5
Note that the Figure demonstrates the relationship between higher openness and changes to poverty and the gini for Ghana with a (red) square marker in the scatter plots.
 
6
A reduction in international financing costs for the government translates in a reduction of the government’s domestic financing and reduces government’s crowding out of private investment.
 
7
Domestic prices of food and energy can differ from the international value in the presence of price controls implemented by the government.
 
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Metadata
Title
Globalization and Inclusive Growth: Can They Go Hand in Hand in Developing Countries?
Authors
Rupa Duttagupta
Sandra Lizarazo Ruiz
Angelica Martinez Leyva
Marina Mendes Tavares
Copyright Year
2018
Book
Getting Globalization Right

Print ISBN: 978-3-319-97691-4

Electronic ISBN: 978-3-319-97692-1

Copyright Year: 2018

DOI
https://doi.org/10.1007/978-3-319-97692-1_12