IV. The overall results of globalization
B. Empirical FAQs
Q1: What has been the relationship between globalization and growth?

    Countries that are so small that they must have open economies often prosper.
    None of the 10 countries with per capita income higher than US has a population above 10M; 6 are below 1M.
        Leichtenstein (37K)
        Qatar (848K)
        Luxembourg (509K)
        Bermuda (69K)
        Singapore (5,353K)
        Jersey (95K)
        Norway (4,707K)
        Brunei (409K)
        Hong Kong (7,153K)
        United Arab Emirates (5,314K)
    2 of the 4 Asian Tigers were small: Singapore (5.4M) and Hong Kong (7.1M)
    3 richest countries in sub-Saharan Africa: Botswana (2.1M, $16,300), Gabon (1.6M, $16,000), Mauritius (1.3M, $15,000), all higher than the world average.

    Empirical findings from large sample studies

    Handout: Globalization and growth: class sample

    Note: "Association is not causation"
        There is still debate about whether globalization fosters growth or just accompanies growth
        Weak to nonexistent evidence that lowering import barriers is the driver (see Dollar and Kraay vs. Rodrik)
        Appears to be more important to market your output to global buyers (exports) than to open up to imports

    But it is nonetheless the case that we lack a good example of an LDC that has grown rapidly without rapidly increasing its exports (i.e., increasing its globalization)
    Counterexamples: North Korea, Burma, Eritrea.

Q2: What has been the relationship between globalization and the level and distribution of income?

US: Real wages in the U.S. handout
    Real wages in the U.S. are about 10% lower today than their peak in the 1970s.

    Estimates of the decline in US wages from the 1970s to the 1990s attributable to globalization range from 15-50%
    The most important factor is technology: labor-saving production techniques and a shift of tastes to high-tech goods which are skill-intensive.
    Any production shift away from L-intensive products, no matter what the reason, has SS theorem effects.

    For the past 20 years, the trend in real wages has reversed, despite continuing increases in import penetration, and the link has never been particularly consistent.
 

     LDCs: varies from country to country

    Note 1: Wages and technology: similar effects everywhere

    Note 2: Nonwage components of well being:

    (1) child labor If wages rise with trade, will that increase child labor in LDCs?

    Why might it rise? child labor is more profitable
    Why might it fall? families can get along with less child labor

    "Does globalization increase child labor? Evidence from Vietnam." NBER8760 (2002), Eric Edwards and Nina Pavcnik.
    1993: Vietnam lifted export rice restrictions
    1993-98: Rice exports doubled and price rose 30%
        Child labor fell by 9% (2.2M), 1M due to the change in rice export policy
        Dramatic increase in school attendance of 14-15 year-old girls

    (2) life expectancy
    longer lifespan, like higher incomes, can also raise lifetime consumption

    (3) absolute poverty

Percentage of global population experiencing absolute poverty:	1970	2006
$1 per day poverty rate	26.8%	5.4%
$2 per day poverty rate	45.2%	5.4%
Number of poor	403 million	152 million
Regional $1 per day poverty rates	1970	2006
Africa, Sub-Sahara	39.9%	31.8%
Middle East & North Africa	8.4%	5.2%
East Asia	58.8%	1.7%
South Asia	20.1%	2.6%
Latin America	11.6%	3.1%0

    (4) Relative income distribution
    Global Gini coefficient: 1970: 67.6 / 2006: 61.2