Transcript Document

Globalization, Growth and Poverty
David Dollar
World Bank
June 2006
Three waves of globalization
Retreat
Wave 1
Wave 3
Wave 2
Foreign capital stock/ developing
country GDP (left axis)
Merchandise exports/ world GDP (left axis)
Immigrants to the U.S. by
decade, millions (right axis)
30%
10
20%
5
10%
0%
1870
1914
1950
1980
2000
0
Measures of global integration
Capital flows
Trade flows
Foreign
assets/world GDP
Trade/GDP
(in percent)
1820
1870
1890
1900
1914
1920
1930
1940
1945
1950
1960
1970
1980
1990
1995
Source
6.9
18.6
17.5
8.4
4.9
6.4
17.7
56.8
Crafts (2000)
(in percent)
2a
10a
12b
18ab
18a
14a
16b
22.4a-20b
26ab
a.Maddison (1995)
b.Crafts (2000)
Transport and communications costs (constant US $)
Sea freight
(average ocean freight and port
charges per ton)
95
60
63
34
27
27
24
29
UNDP (1999)
Air transport
(average revenue per
passenger mile)
0.68
0.46
0.3
0.24
0.16
0.1
0.11
UNDP (1999)
Telephone call
( 3min NY/London)
245
189
53
46
32
5
3
UNDP (1999)
Global growth has shifted to developing countries
Per capita GDP growth rate (percent)
Industrialized
economies
4
3
Developing
economies
2
1
0
1960s
1970s
1980s
1990s
Developing country exports
have shifted toward manufactures
Percent
80
Manufactures
60
40
Minerals
20
Agriculture
0
1965
1970
1975
1980
1985
1990
1995
Change in trade/GDP, 1977-97
(selected countries)
China
Mexico
Argentina
Philippines
Malaysia
Bangladesh
Thailand
India
Brazil
Pakistan
Kenya
Togo
Honduras
Senegal
Nigeria
Egypt
Zambia
-100
0
Percent change
100
Increase in trade/GDP: 1970s to 1990s
104%
100%
75%
71%
50%
25%
0%
-18%
Rest of developing Rich countries
world
Globalizers
Convergence and divergence in the 1990s
GDP per capita growth rates, 1990s
6%
5%
4%
2%
2%
0
-1%
Rich countries
Rest of developing
world
Globalizers
China’s success to date
• Began reform with good human capital and
equitable division of land
• Openness to trade and FDI introduced new
technologies, strengthened incentives
• Sound investment climate for agriculture
(household responsibility system) and
industry (FDI, private entry)
China began reform with good human capital
5.2575
G NB
lninfant_mort80
UG A
MLI
SLE
NER
G IN
AG O
MWI
G MB
ETH BFA
G NQ
MOZ
ZAR NPLBG
RWA
DHTI
SEN
BEN
TCD
CAF
CO MEG Y
MRT
BDI
CIV BO L
IND LSO
NG
A
TZA
MDG
TG
O
PAK
CMR
TUR
MAR
G TMDZA
G HA
IRN PER
ZMB CO G
NIC
SLV
NAM
IDN
PNG
HND
KEN
TUN
DO M
ZWE
G UY
ECU
BWA
CPV
PHL
SYR
JO RBLZ
CHN
PRY
THA
CO L
LKA
RO M
G AB
BRA
FJI PAN
MUS
MYS
CHL
ZAF
MEX
URY
VEN TTO
ARG
JAM
CRI
KO R
1.94591
6.09369
PRT
HUN
BRB
PO L
G RC
CYP
ISR
ITA
AUT
ESP NZL
G ER
USA
IRL
G BRBEL
LUX
SG P
AUS
CAN
FRA
NLD
NODNK
R
CHE
JPN
FIN ISL
SWE
10.0133
Log per capita GDP 1980
China’s success to date
• Began reform with good human capital and
equitable division of land
• Openness to trade and FDI introduced new
technologies, strengthened incentives
• Sound investment climate for agriculture
(household responsibility system) and
industry (FDI, private entry)
Average unweighted tariff rates by region
Percent
1980-85
1986-90
1991-95
1996-98
60
40
20
0
South
Asia
Source: Martin (2001)
Latin America East Asia
and the
and the
Caribbean
Pacific
SubSaharan
Africa
Middle East Europe and Industrialized
and North
Central
economies
Africa
Asia
Trade Reforms and Trade Volumes
China 1978 - 2000
Trade/GDP (log)
2
Average tariff rate
Average tariff
0.5
(right axis)
1.6
0.4
Trade/GDP
1.2
(left axis)
0.3
0.8
1988 8,000 trading companies
0.2
1986 Forex swap market
0.4
1984 800 trading companies
0.1
1979 Open SEZs to FDI, forex retention
0
1978 Trade monopolized by MOFERT
1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000
0
China’s success to date
• Began reform with good human capital and
equitable division of land
• Openness to trade and FDI introduced new
technologies, strengthened incentives
• Sound investment climate for agriculture
(household responsibility system) and
industry (FDI, private entry)
Loss due to power outage
Bangladesh
Brazil
China
India
Pakistan
Bangalore
Calcutta
Chengdu
Chennai
Dhaka
Guangzhou
Karachi
Sao Paulo
Shanghai
0
1
2
3
4
Percent of total sales
5
6
7
Longest delay to clear import customs
Bangalore
Bangladesh
Brazil
China
India
Pakistan
Calcutta
Chengdu
Chennai
Dhaka
Guangzhou
Karachi
Sao Paulo
Shanghai
0
5
10
15
Days
20
25
30
35
Investment climate bottlenecks
Costs as a share of sales
30
Disputes with suppliers and creditors
Regulation
Bribes
Crime
Infrastructure disruptions
20
10
0
China
Poland
Brazil
Pakistan Algeria
Source: World Development Report 2005, Investment Climate Surveys
Uganda Tanzania
Poor countries that globalized have seen the
fastest growth in wages
Wage growth between 1980s and 1990s (percent)
30
20
10
0
Rest of developing
world
Rich countries
Globalizers
Growth is good for the poor
0.2
Average annual change in log
(per capita income in poorest quintile)
0.1
-0.1
0.1
Average annual change
in log (per capita income)
-0.1
y = 1.185x - 0.0068
R2 = 0.4935
-0.2
Increased trade has no correlation with changes
in inequality
15
Change in Gini coefficient
10
5
-0.4
-0.2
0.2
-5
-10
-15
Change in trade to GDP
0.4
Poverty reduction in Pakistan, Bangladesh, India,
Vietnam, and China closely related to growth
Percent per annum, 1992-98
10
GDP per capita growth rate
9.2
Poverty reduction
8.4
8
7.5
6.4
6
5.4
4.6
4
3.1
2
2.1
1.5
0.5
0
Pakistan Bangladesh
India
Vietnam
China
Extreme Poverty in the World, 1820-2001
Number of people living on less than $1 per day (millions)
1,500
1,400
1,300
BourguignonMorrisson
1,200
ChenRavallion
1,100
1,000
900
1820
1840
1860
1880
1900
1920
1940
1960
1980
2000
Global household inequality has
declined…
…but will rise again if
same growth as 1980-98
Mean log derivation
Mean log derivation
Bourguigon
Bourguigon
and Morrisson
and Morrisson
1820
1850 1870 1890 1910 1929 1950
1820
1850 1870 1890 1910 1929 1950
Recent changes in poverty: 2001-2004
Changes in the incidence of poverty
Poverty line: welfare measure
Value of line in 2003 all
China rural prices (Yuan
per person per year)
Year
2001
2003
2004
World Bank estimates: % of national population below poverty line
Official poverty line: income
637
3.36
3.00
2.60
Low-income line: income
882
7.46
6.80
5.88
Dollar-a-day line: consumption
888
15.36
13.10
10.38
Official NBS estimates: % of rural population below poverty line
Official poverty line: income/consumption
637
3.2
3.1
2.8
Low-income line: income/consumption
882
9.8
9.1
8.1
Source: World Bank estimates based on NBS household data. Estimates for 2001 are
based on sub-samples of the NBS Rural and Urban Household Surveys. Estimates for
2004 are from a World Bank-NBS Special Purpose Survey. Estimates for 2003 are based
on the national sample. Official estimates are from NBS Communiqué (May 2005).
 Poverty incidence has continued to decline in recent years
Recent changes in poverty: 2001-2004
Changes in the number of poor
Poverty line: welfare measure
Value of line in 2003 all
China rural prices (Yuan
per person per year)
Year
2001
2003
2004
World Bank estimates: number of poor nationwide (rural and urban) (millions)
Official poverty line: income
637
42.9
39.3
33.7
Low-income line: income
882
95.2
88.0
76.4
Dollar-a-day line: consumption
888
196.1
169.2
134.9
Official NBS estimates: number of rural poor (millions)
Official poverty line: income/consumption
637
29.27
29.00
26.10
Low-income line: income/consumption
882
90.29
85.17
75.87
Source: World Bank estimates based on NBS household data. Estimates for 2001 are
based on sub-samples of the NBS Rural and Urban Household Surveys. Estimates for
2004 are from a World Bank-NBS Special Purpose Survey. Estimates for 2003 are based
on the national sample. Official estimates are from NBS Communiqué (May 2005).
 The numbers of poor have also continued to fall in recent years
Taxonomy of the rural poor
(those below the low-income poverty line)
… in terms of ten characteristics
(= majority of households have that characteristic)
High
Low
Type of depend work
poor
. ratio capicity
Low
education


1

Low
producFar from
No
Number
Limited tivity of Minority Mount. county migrant No TVE % of all of poor
land
land
area
area
town
worker worker
poor (million)


2

3

4

17.3
15.1



8.6
7.5


13.9
12.1


18.6
16.2



6


7




5
Total







20.6
18.0




19.6
17.1
1.6
1.4
100
87.3





 Some problems are common to almost all groups of poor – e.g., no migrant worker, no TVE
worker, low education
 Others apply to particular categories of poor:
 Group 5 (21%) are in remote mountainous minority areas
 Group 3 (14%) are not in remote mountainous minority areas, but have limited land
 Group 1 (17%) are hampered by low work capacity of adult household members
Child labor and household
consumption levels in Vietnam
Share of 6-15 year olds working
40%
1993
30%
20%
6.54
1998
6.64
6.74
6.84
6.94
7.04
7.14
7.24
7.34
Per capita household consumption 1993 (log scale)
7.44
7.54
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.”
The Pew Global Attitudes Project
Globalization has a bad effect on my country
27%
US/Western Europe
9%
10%
Developing Asia
Sub-Saharan Africa
The Pew Global Attitudes Project
These institutions have a good influence in my
country:
Multilateral corporations
WTO, World Bank, IMF
75%
72%
66%
Anti-globalization
protestors
35%
27%
54%
28%
63%
62%
US/ Developing SubWestern Asia Saharan
Europe
Africa
US/ Developing SubWestern Asia Saharan
Europe
Africa
US/ Developing SubWestern Asia Saharan
Europe
Africa