Globalization-Poverty Nexuses: Evidences from Cross-Country Analysis

Abstract

The current study examines the impact of globalization on poverty across 119 countries by utilizing poverty headcount index based on 1.90$ international poverty line and KOF globalization index developed by Dreher, Gaston, and Martens (2008). The main objectives of the research are to examine the general impact of globalization on poverty and region specific impact of globalization on poverty. The cross-section analysis based on OLS method suggests that globalization significantly reduces the level of poverty of selected countries. Apart from that, the study found that secondary education enrolment ratio, percentage of urban population and percentage of population who has access to electricity also reduce the poverty. However, impact of globalization on poverty is not equal across all the regions. The region-based analysis confirms that globalization reduces poverty in all considered regions except Sub-Saharan Africa. More specifically, contribution of globalization on poverty reduction is more substantial in South Asia region followed by East Asia and Pacific and Europe and Central Asia regions. Consequently, the study strongly recommends countries to engage with the process of globalization and however the degree of opening up trade policies, capital accounts and labor markets should be decided based on their own domestic macroeconomic conditions and future economic goals.