Despite ever increasing global GDP and billions of people who have left poverty in recent decades, there are still huge differences in living standards around the world. There are many reasons why some countries have remained poor: These include a lack of production factors, a lack of technology, poor institutions, and unfavorable geographical conditions.
By drawing countries closer together, globalization can help address some of these root causes. International migration allows people to become more productive, earn higher wages, and remit parts of their incomes to their country of origin. International capital flows can provide investment capital in shallow financial markets and thus create the conditions for local innovators to succeed. Development cooperation can help, for example, by alleviating hunger and improving access to education and healthcare. Integration in global value chains can create wage employment, increase local purchasing power, and thus improve growth prospects.
Yet, there are also risks involved. The emigration of the most capable people might cause skills shortages in origin countries. Large capital inflows may destabilize local economies, especially if they stop suddenly during crises. Aid flows can negatively impact the incentives for good governance and local innovation. And low skilled workers at the bottom of the global value chain may have too little bargaining power to receive sufficient labor protection.
In our research, we study the impact of these facets of globalization on international development and the policies that may be used to maximize its benefits while minimizing its risks.
Much of our work focuses on Africa. To facilitate exchange with other researchers and stakeholders in policy and development practice, we run two Africa-related initiatives: