Attacking Poverty: Is It Globalisation?… Or Is It the Institutions?

Abstract

We empirically analyze the relationship between globalisation and poverty. Deviating from the mainstream literature, we use ‘synthetic’ globalisation and poverty indicators, which combine multiple single indicators into single-valued statistics. Further, we study a sample that includes OECD countries as well as non-OECD countries, which allows us to examine the effect of structural differences between countries (summarized in a OECD dummy). Our results reveal no significant effect of globalisation on poverty when correcting for the OECD effect. We argue that this suggests institutional quality as a more fundamental determinant of a country’s poverty performance than the degree of integration with the global economy. On the methodological level, our use of synthetic indicators entails a parsimonious specification of the globalisation-poverty relationship, which increases its transparency.