How has globalisation affected the economic growth, structural change and poverty reduction linkages? Insights from international comparisons

This paper examines economic growth, structural change and poverty reduction linkages across 147 countries of the world during 1991-2015. It emphasises that under the liberal market growth model structural change-growth linkages are complex, which in turn can complicate the poverty reduction effects of growth. It proposes a conceptual framework to explain how growth and structural dynamics have been influenced by globalisation. It argues that at the core of the conventional growth-structural change relationship lies the assumption that economic activities within and across sectors are strongly connected with each other through forward and backward linkages. Globalisation may distort this connectedness affecting different sectors asymmetrically. As a result, structural change in value added and employment may not commensurate with each other exerting ambiguous effects on cross-sector productivity dispersions. The study hypothesises that the convergence between them is critical for productivity enhancing structural change, and in turn, for poverty reducing effects of growth. The generalised method of moments (GMM) estimator within the framework of a dynamic panel data approach upholds the hypothesis. These findings question the sustainability of the growth and structural change processes taking place in the developing world and call for deeper strategic government interventions for broad based economic development with an emphasis on manufacturing.

Keywords: Economic Growth, Globalisation, Structural Change, Poverty reduction, Cross country analysis

JEL Classification: E24, O14, O4