Effects of Globalization on the Convergence of Poverty Levels among Asian Countries

Abstract

This study empirically analyzed the effects of economic globalization on differences in poverty levels among Asian countries using data for a 25-year period, as well as the effects of economic globalization on the process. Trade openness (TO) and foreign direct investment (FDI) data were used as proxy variables for globalization. Using a headcount ratio (HCR) and per capita gross domestic product (PGDP), we analyzed the convergence of poverty levels using the σ- and β-convergence concepts. It was found that poverty levels have been substantially reduced in Asia and that economic globalization assisted in this change. The PGDP gaps among countries have gradually decreased and trade openness and FDI have had a strong effect on poverty reduction. Finally, there was no evidence for convergence in terms of the HCR during the recent globalization period and, therefore, it was concluded that economic globalization has not assisted in the convergence of HCR, while it helped the convergence of PGDP. This implies that the poverty issue is different from the income level issue. Thus, care must be taken to consider policy beyond the simple approach of economic growth.

KEYWORDS:

• Economic globalization
• Asia
• poverty
• convergence
• σ-convergence
• β-convergence

JEL:

• F14
• F62
• F63

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Notes

1 Armenia, Bangladesh, Bhutan, China, Cyprus, India, Indonesia, Iran, Israel, Japan, Jordan, Kazakhstan, Korea, Kyrgyzstan, Lao, Malaysia, Mongolia, Nepal, Pakistan, Philippines, Sri Lanka, Tajikistan, Thailand, Turkey, and Vietnam

2 The HDI was used in the United Nations development report in 1990 to overcome the limitations of using GDP. HDI is a measure of a country's overall human development and is determined by calculating a composite of three factors: life expectancy, adult literacy rate, and per capita income.

3 There may be theoretical problems in testing ratio variables using a convergence model. However, it still may be meaningful in its own way to use these econometric analysis methods rather than simply descriptively explaining whether the poverty rate is decreasing.

4 The application of this method to assess convergence is widely used in other areas (see Kathuria & Oh, 2018)

5 It is true that the difference in the coefficients is not big. However, it is not easy to verify whether this difference is a significant difference using statistical techniques.

Additional information

Funding

This work was supported by National Research Foundation of Korea: [Grant Number NRF-2021S1A5B8096365].

Notes on contributors

Yilin Li

Yilin Li is a Lecturer in Department of International Trade of Chungnam National University, South Korea.

Jingbu Wang

Jingbu Wang is a Lecturer in School of Economics, Xi'an University of Economics and Finance, Xi'an, China.

Keunyeob Oh

Keunyeob Oh is a Professor, Department of International Trade, Chungnam National University, South Korea.