Assessing the Impact of Globalization on Poverty and Inequality: Using a New Lens on an Old Puzzle

Type Conference Paper - Brookings Trade Forum 2004
Title Assessing the Impact of Globalization on Poverty and Inequality: Using a New Lens on an Old Puzzle
Author(s)
Publication (Day/Month/Year) 2004
URL https://www.brookings.edu/wp-content/uploads/2012/04/20040603a.pdf
Abstract
A persistent puzzle in the debate over globalization is the gap between economists' assessments of the aggregate benefits of the process and the more pessimistic assessments that are typical of the general public—or at least typical of the debate among the vocal subset of the public that expresses opinions on the topic. Study after study confirms the benefits for poor countries of integrating into the world economy, albeit placing different degrees of emphasis on the importance of initial conditions and institutional endowments in achieving growth and poverty reduction.1 Yet public perceptions of the globalization process—reported in opinion polls and reflected in public demonstrations in cities such as Seattle, Prague, and Porto Alegre—are much more negative.2

Analyses of trends based on aggregate, income-based measures provide important benchmarks for assessing the impact of globalization on poverty and inequality. The research presented in this paper complements these benchmarks by using alternative measures to highlight different trends. These trends include short-term movements in and out of poverty, changes in the distribution over the life or earnings cycle, distributional shifts at the sector and cohort level, the role of relative as well as absolute differences, and changes in reported well-being. [End Page 131] One objective of this analysis is to shed light on the disconnect between economists' assessments based on income measures and those of the average (or at least vocal average) layman.

These efforts are exploratory rather than comprehensive. They attempt to provide an initial picture by analyzing surveys of income mobility and reported well-being in two countries in the process of integrating into the global economy: Peru and Russia. This analysis reveals significant discrepancies between reported measures of well-being and income measures. It relies on the more general framework provided by the economics of happiness to explain these findings and their linkages to the globalization process. At minimum, the findings provide a new lens for examining at an old puzzle, suggest some tentative links to policy, and highlight new questions that need to be answered before the effects of globalization on poverty and inequality can be fully understood.

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