Effects of globalization: inequality and social dimension Giovanni - - PowerPoint PPT Presentation

Effects of globalization: inequality and social dimension

Giovanni Marin Department of Economics, Society, Politics Università degli Studi di Urbino ‘Carlo Bo’

References for this lecture

• BBGV

– Chapter 14

• Paragraphs 14.5, 14.6

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The ‘social’ dimension of globalization

• In this lecture we depart from the direct

implications of the models studied so far

• Broader discussion of the impact of

globalization on poor and emerging countries

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Definition of poverty: the poverty line

• The poverty line is the minimum amount of income (in ‘per day’

terms) that is needed to satisfy basic needs

– Basic nutrition – Cloth – Shelter

• It is not expressed in nominal terms

– One dollar in Urbino is worth much more (in terms of goods that can be purchased) than the same dollar in Copenhagen – Purchasing Power Parity (PPP) conversion

• If a person earns less (or cannot spend more) than what is needed

to satisfy the basic needs, it is said to be absolutely poor

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The poverty line

• The World Bank usually employs two different

defintions of poverty line

– $1.25 a day (international 2005 PPP dollars) – $2 a day (international 2005 PPP dollars)

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Millennium Development Goals (set in 2000, to be reached by 2015)

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Figure 14.6 Number of poor people in the developing world, 1981-2008

• a. Number of poor people in developing

world; headcount index, million 1,281 1,906 2,453 2,901 500 1,000 1,500 2,000 2,500 3,000 3,500 1980 1990 2000 2010 $1.25 per day $2 per day

• b. Number of poor people in developing

world; headcount index, % of population

22.8 52.9 43.6 70.5 10 20 30 40 50 60 70 80 1980 1990 2000 2010

$1.25 per day $2 per day

Source: author’s calculations based on World Development Indicators online; the developing world consists of developing countries in EAP, ECA, LAC, MENA, SSA, and SA, see the main text.

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Poverty eradication

• On average, the fight to poverty has been very

successful

• Extremely successful in some areas, poorly

successful in some other areas

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Figure 14.7 Poverty headcount ratio at $ 1.25 a day (PPP), % of population, 1981-2008

Poverty headcount ratio at $1.25 a day (PPP), % of population 20 40 60 80 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 EAP SSA SA LAC MENA ECA Developing world total

Source: author’s calculations based on World Development Indicators online; see the main text for regional abbreviations EAP, ECA, LAC, MENA, SSA, and SA

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Income distribution

• The ‘poverty line’ approach to measure poverty and

income distrubition takes an ‘individual’ approach

– For each individual, no matter its country of residence, we need to know about his income and compare it with the poverty line

• Changes in the global distribution of income depend
• n the combination of

– Within-country changes in income distribution (e.g. the

• ne driven by HOS model)

– Between-country changes in income distribution (e.g. due to convergence-divergence)

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$50 $500 $5,000 $50,000 20,000 60,000 40,000

Income level; constant 2000 international $, log scale

poverty line World East Asia SSA South Asia OECD

density

• a. 1970

Figure 14.8 Global income distribution, 1970 and 2006

Source: based on Pinkovskiy and Sala-i-Martin (2009); the poverty line corresponds to $312 a year, or $1 a day in 2006 prices; see the main text for abbreviations; note: not all regions are identified in the figures

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$50 $500 $5,000 $50,000 40,000 120,000 80,000

Income level; constant 2000 international $, log scale

poverty line World East Asia SSA South Asia OECD

density

• b. 2006

Figure 14.8 Global income distribution, 1970 and 2006

Source: based on Pinkovskiy and Sala-i-Martin (2009); the poverty line corresponds to $312 a year, or $1 a day in 2006 prices; see the main text for abbreviations; note: not all regions are identified in the figures

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cumulative population cumulative income 1 1

A B

Gini coefficient = A/(A+B)

Figure 14.9 The Lorenz curve and the Gini coefficient

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Figure 14.10 Income inequality; Gini coefficient, selected countries, 1981-2010

Gini coefficients for selected countries; per cent 1981-2010 10 20 30 40 50 60 70 80 1980 1985 1990 1995 2000 2005 2010 minimum maximum China India Brazil Nigeria South Africa Russia

Source: author’s calculations based on World Development Indicators online; minimum is 19.4 for Czech Republic in 1988; maximum is 74.3 for Namibia in 1993

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Figure 14.11 Global income inequality; Gini coefficient, 1970-2006

Global income inequality; Gini coefficient, 1970-2006 0.612 0.679 0.55 0.60 0.65 0.70 0.75 1970 1975 1980 1985 1990 1995 2000 2005

Source: based on data from Pinkovskiy and Sala-i-Martin (2009); note: scale does not start at zero

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Capital mobility and inequality

• North-to-South (vertical and horizontal) multinational

activity contributes to economic growth (value added)

• Value added is distributed to production factors

– Wages paid to local workers contribute to the wealth of the host country – Compensation to capital is sent back to the home country

• f the multinational
• This has relevant implications for the global

distribution of wealth

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Globalization and urbanization

• Globalization leads to the specialization in production
• Specialization occurs both in developed and in developing

countries

• Rapid specialization has important implications for within-country

structural change

– Countries that specialize in industrial production will experience a migration from rural areas to industrial (urban) areas – Specialization in agricultural production (e.g. monocolture) requires dramatic improvements in agricultural productivity ➔ poor people migrate to urban areas as subsistence agriculture is not possible any longer (e.g. land grabbing)

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10 20 30 40 50 60 70 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

China

Trade (% of GDP) Urban population (% of total)

Source: World Bank Development Indicators

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20 40 60 80 100 120 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

South Korea

Trade (% of GDP) Urban population (% of total)

Source: World Bank Development Indicators

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10 20 30 40 50 60 70 1960 1962 1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014

World

Trade (% of GDP) Urban population (% of total)

Source: World Bank Development Indicators

Globalization and urbanization

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Nairobi, Kenya Slum of Korogocho My picture, June 2004

Urbanization and social conditions

• Rapid urbanization is very difficult to be governed and planned

– Housing – Transportation – Provision of public services

• Poor institutional quality makes things worse
• People migrate from rural to urban areas to increase their

monetary income but

– The price of goods and services that satisfy basic needs are higher in urban than in rural areas – Less access to ‘informal economy’ in urban areas (e.g. it is impossible to cultivate your own vegetable garden)

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Urbanization and social conditions

• Contribution of urbanization to improve social conditions

– Access to health services – Access to electricity and water – More opportunities for employment in the industrial and service sectors

• Contribution of urbanization to worsen social conditions

– Vulnerability to the economic cycle – Poor air quality – Weaker ties with family and clan that act, in rural context, as ‘social security’

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