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《Trade__Growth__and_Poverty》.pdf
Trade, Growth, and Poverty
David Dollar and Aart Kraay
Development Research Group, The World Bank
First Draft: October 2000
This Draft: March 2001
Abstract: A key issue today is the effect of globalization on inequality and poverty. We first identify a
group of developing countries that are participating more in globalization. Since China, India, and several
other large countries are part of this group, well over half of the population of the developing world lives
in these globalizing economies. The post-1980 globalizers have seen large increases in trade, and
significant declines in tariffs over the past 20 years. Their growth rates have accelerated from the 1970s
to the 1980s to the 1990s, even as growth in the rich countries and the rest of the developing world has
declined. The post-1980 globalizers are catching up to the rich countries while the rest of the developing
world is falling farther behind. We next ask how general these patterns are, through regressions that
exploit the within-country variation in trade and growth. We find a strong positive effect of trade on
growth after controlling for changes in other policies and addressing endogeneity with internal
intruments. Finally we examine the effects of trade on the poor. Since there is little systematic evidence
of a relationship between changes in trade volumes (or any other globalization measure we consider) and
changes in income share of the poorest, the increase in growth rates that accompanies expanded trade
leads to proportionate increases in incomes of the poor. The evidence from individual cases and from
cross-country analysis supports the view that globalization leads to faster growth and poverty reduction in
poor countries.
Views expressed are those of the authors and do not necessarily reflect
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