Poverty and the Welfare Costs of Risk Associated with Globalization
19 Pages Posted: 3 Mar 2011
Date Written: January 21, 2005
The notion of "globalization" implies future change, and the prospect of these future changes seems likely to increase the uncertainty faced by poor households in developing countries. In this paper we use data on the changes in Lorenz curves over the last fifty years for a sample of 34 (mostly developing) countries. Treating each country-quintile-year as an observation, we first account for variation in consumption expenditures. We find that global shocks and country-level shocks are each of roughly equal importance in explaining variation in country-quintile consumption growth. What we term "globalization shocks", or global shocks which (on average) have a differential impact on poor and rich households are smaller in magnitude but nonetheless play a statistically significant role in explaining variation in consumption growth across both time and across the world distribution of consumption expenditures.
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