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Globalization and the challenge for developing countries

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  • Yusuf, Shahid
Abstract
Rsearch on the sources of growth shows several factors to be relevant to all countries, rich or poor. Whether developing countries can substantially raise per capita incomes depends on policies that address these variables: labor, human capital, capital investment in research and development, technological progress, and the increase in total factor productivity arising from scale economies, the effects of agglomeration, externalities, and institutions that secure rights and minimize transaction costs. The author argues that a comprehensive approach to globalization, managed, and abetted by good policies, can magnify the effects of growth-promoting measures. Among his observations: 1) Returns from investment in skills are much greater in a more technologically advanced and integrated economy. 2) Trade, by enlarging markets, reinforces those gains, and the option to migrate further augments the value of skills. The growing worldwide gap in income between skilled and unskilled workers suggests how much more fruitful skills are under globalization. 3) A 50 percent increase (or even a doubling) in growth rates demands a vast amount of capital, embodying modern technology and the knowledge needed to put it to best use. The international economy can be a source of such capital. 4) Openness, combined with spatially neutral domestic policies and the scaling back of regulatory constraints on domestic business activities, can unleash the full force of agglomeration economies and networking externalities, allowing industrial clusters to emerge in metropolitan regions. 5) Openness is also the best way for low-income countries to tap into technologies that will galvanize agriculture (low-income countries'economic center) and manufacturing activities and nourish indigenous technological advance. 6) No research convincingly makes the case for delaying openness or for sequencing the various elements of openness. A good case can be made for embracing all the key elements of globalization at the same time--while sequencing (where needed) the pace of integration in such areas as trade and finance.

Suggested Citation

  • Yusuf, Shahid, 2001. "Globalization and the challenge for developing countries," Policy Research Working Paper Series 2618, The World Bank.
    • Handle: RePEc:wbk:wbrwps:2618
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    3. Motelle, Sephooko & Biekpe, Nicholas, 2015. "Financial integration and stability in the Southern African development community," Journal of Economics and Business, Elsevier, vol. 79(C), pages 100-117.
    4. Heshmati, Almas, 2004. "The Relationship between Income Inequality, Poverty and Globalisation," IZA Discussion Papers 1277, Institute of Labor Economics (IZA).
    5. Amit Kundu & Dev Narayan Sarkar & Arabinda Bhattacharya, 2020. "Sustainable agrarian subaltern development through technology intervention: an experimental study of the interventions by Indian Farmers Fertilizer Cooperative Limited," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 22(1), pages 142-159, June.
    6. Branko Milanovic, 2005. "Can We Discern the Effect of Globalization on Income Distribution? Evidence from Household Surveys," The World Bank Economic Review, World Bank, vol. 19(1), pages 21-44.
    7. Wouterse, Fleur & Taylor, J. Edward, 2008. "Migration and Income Diversification:: Evidence from Burkina Faso," World Development, Elsevier, vol. 36(4), pages 625-640, April.
    8. Sandeep Mazumder, 2017. "The Impact of Globalization on Inflation in Developing Countries," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 42(3), pages 41-60, September.
    9. Pierre‐Richard Agénor, 2003. "Benefits and Costs of International Financial Integration: Theory and Facts," The World Economy, Wiley Blackwell, vol. 26(8), pages 1089-1118, August.
    10. Frank L. BARTELS & Markus EICHER & Christopher BACHTROG & Gorazd REZONJA, 2009. "Foreign Direct Investment In Sub‐Saharan Africa: Changing Location‐Specific Advantages As Signals Of Competitiveness," The Developing Economies, Institute of Developing Economies, vol. 47(3), pages 244-278, September.
    11. Fleur Wouterse, 2010. "Migration and technical efficiency in cereal production: evidence from Burkina Faso," Agricultural Economics, International Association of Agricultural Economists, vol. 41(5), pages 385-395, September.
    12. Pierluigi Montalbano & Alessandro Federici & Umberto Triulzi & Carlo Pietrobelli, 2005. "Trade Openness and Vulnerability in Central and Eastern Europe," WIDER Working Paper Series RP2005-43, World Institute for Development Economic Research (UNU-WIDER).
    13. Saadaoui, Zied, 2007. "L’intégration financière internationale :Une comparaison descriptive des effets sur les pays industrialisés et les pays émergents [International financial integration: A descriptive comparison of t," MPRA Paper 25330, University Library of Munich, Germany.
    14. Nguyen-Tan Hung & Kuo-Liang Yen, 2022. "Towards Sustainable Internationalization of Higher Education: Innovative Marketing Strategies for International Student Recruitment," Sustainability, MDPI, vol. 14(14), pages 1-22, July.
    15. Runge, C. Ford & Senauer, Benjamin & Pardey, Philip G. & Rosegrant, Mark W. (ed.), 2003. "Ending hunger in our lifetime: Food security and globalization," IFPRI books, International Food Policy Research Institute (IFPRI), number 0-8018-7725-3.
    16. Istvan Konya & Hiroshi Ohashi, 2004. "Globalization and Consumption Patterns among the OECD Countries," Boston College Working Papers in Economics 596, Boston College Department of Economics.
    17. Wouterse, Fleur, 2012. "Migration and Rural Welfare: The Impact of Potential Policy Reforms in Europe," World Development, Elsevier, vol. 40(12), pages 2427-2439.

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