Globalization and Trade

@Fabrizio Opertti


The persistence of poverty in the developing world, especially in Sub-Saharan Africa (SSA), in the face of increased globalisation and rapid trade liberalisation since World War II has inspired considerable debate on the impact of globalisation, in general, and trade liberalisation, in particular, on poverty. The conventional wisdom, based on the Stolper-Samuelson theorem, is that global trade liberalisation would lead to a rise in the incomes of unskilled labour in developing countries, and since developing countries are more likely to have a comparative advantage in producing unskilled labour-intensive goods, one would expect trade liberalization in these countries to lead to reductions in poverty.

However, the experiences of many developing countries, particularly in SSA, have been disappointing and in many cases, poverty has increased following trade liberalisation. These contradictions have stimulated a lot of concern about whether the poor gain from trade liberalisation, and under what circumstances it may actually hurt them. However, empirical evidence is mixed, and the globalization-poverty debate continues today.