Globalization and Sustainable Structural Change

The international community is committed to achieving the Sustainable Development Goals (SDGs) by 2030. In addition to the objective of eliminating absolute poverty, the SDGs stress the importance of peace, good governance, and cooperation between countries at different stages of economic development. Therefore, policies that take sustainability into account are starting to shape globalization. The result is a more forward-looking perspective in policy-making that targets better outcomes both for populations of developing and emerging countries and the environments they live in. This will be particularly important in the medium and long run when social and environmental consequences of unregulated economic activity will become more visible. In the short run, such policies may restrain growth, though, resulting in less poverty reduction.

In a newly formed theme within our research center, we study two aspects of this in particular.

First, becoming part of global supply chains can boost socio-economic development and environmental efficiency in production, but can also have negative impacts. We analyze the local welfare effects of global economic links for the example of large-scale land investments in Africa. Existing low labor standards and environmental degradation have led to calls for making global supply chains more sustainable. Two main approaches set by rich country governments are regulatory measures and voluntary schemes that target consumers. In a new research network, we analyze the governance of sustainable global supply chains. In doing so, we also cooperate with the Kiel Center for Globalization (KCG), a network connecting researchers from economics, ethics and management in their work on global supply chains.

Second, when designing policy at both the global and national level, the close interaction between structural change and environmental change has to be considered. We put a specific focus on the agricultural sector, where productivity depends on favorable climatic conditions. On the other hand, ambitious climate policy is feared to prevent the expansion of industrial activities necessary for long-term growth and development. Furthermore, it is believed to adversely affect poor households by increasing the relative prices of carbon-intensive goods and services. The costs for cushioning the climate-change-induced economic losses by implementing adaptation measures will depend in large parts on the integration of affected countries and sectors into the global economy.