Globalization and the poor -- a look at the evidence | Krisztina Kis-Katos | TEDxStuttgart

opinions and foreign opinions, but in addition I'm also going to talk about statistical

evidence

and I'm going to argue that statistical

evidence

is especially important when we think about issues, all three are very strong emotions in the US, so let's start with emotions first When do you hear world

globalization

? What are the images that come to mind? Do you think of huge container ships going around the world and transporting tons and tons of goods? Do you think of financial centers operating 24 hours a day or do you think like me of shiny shopping centers in Southeast Asia well stocked with Western brands whose products have been produced somewhere nearby or does the word rather remind you of mass protests?

Does it make you Feel concerned about environmental damage or shocking working conditions in Spec stores? producing for the world market we all have very different images in our minds, some of them rather neutral or even optimistic, others more probably with a negative charge because of all this. I would like to restrict or limit your attention to an important element of

globalization

which is international trade. and I would like to make you think about international trade. I guess you don't have very strong opinions on the matter. In fact, I think only one person in ten sitting in this theater would think that the growing commercial and business languages ​​of Germany and the rest of the world are a pretty bad thing, the other nine would consider them quite good or even very good.

Now, in saying this, I potentially made a big mistake. I use nationally representative opinion data to describe your own views in doing so. I implicitly assumed that its representative portion of the German adult population. I'm sorry to tell you that I'm pretty sure it's not. It's a very self-selected group of people, at least you were willing to sit through an entire night of tedx talks, which is pretty atypical behavior, are you more or less concerned about globalization? Frankly, I don't know, but what I wanted to point out is that even when we think about things as simple as your opinions, it is very important. do statistics or take them seriously in order to reach meaningful conclusions for me, it is even more important to take statistics seriously because I am interested in understanding the effects of globalization and understanding the effects of international trade so that I am a researcher and economist and I am especially interested in the question: what does international trade bring to people around the world?

Does international trade benefit people around the world? Especially does international trade benefit the

poor

in developing countries? It will most likely tell you that international trade should bring some benefits to a country as a whole, but it will also tell you that some people will gain more, some will gain less, and some will even lose. Basic economic theories predict that, especially, those people who will benefit from globalization will be those who own something that is more valuable globally than locally, so in a high-income country these will be capitalists, highly skilled workers who will be the main beneficiaries of trade in a low-income country. country these will be low-skilled workers who are abundant locally but relatively scarce globally.

This simple economic argument lies at the heart of the expectation of many economists that the

poor

should actually benefit from international trade around the world, but if this really happens. and whether this actually happens is an empirical question, so in the rest of the talk I would like to show you some empirical evidence about this, but before I get into that first I would still like to talk about opinions, so what you see here is Basically , opinion poll data, recent opinion data collected by the Pew Research Center based on statistically representative national opinion pulse surveys. On the vertical axis you see the proportion of people who agree that their own country's growing trade and trade links with the rest of the world. are a good thing on the horizontal axis you see the proportion of people who think that trade will increase wages each circle represents the country the size of the circle shows how important trade is in that country's economy it is basically the volume of trade divided by the total volume of production the first thing you can notice is that people's support for globalization is not independent of what they think about the wage effects of trade, but there is quite a bit of variation up there, so you can

look

at the Germans.

The Germans are quite optimistic about the overall benefits of trade, which was a 9 out of 10 I was using before, but they are quite suspicious and skeptical when it comes to the effects of trade on wages and they are not alone in this if you

look

. most high-income countries, I denoted them in darker shaded circles and you will see that people are generally more suspicious about what is going to happen to international trade wages as we start to move towards increasingly poorer countries and the Colors become increasingly paler. Let's see that more and more people expect commerce to benefit, especially in wages.

It's actually surprising that it goes in line with economics: basic economic theory predicted that especially workers and low-skilled workers in developing countries should be the ones who benefit from trade. in terms of wages, but can we do better than this if we want to understand the effects of trade? Fortunately, we can do much better than this. We have enormous amounts of data available now from the micro level. We have data from household surveys. Company surveys. working market. Surveys from many countries around the world over many different time periods, we can use this data to investigate and understand what effect international trade has on people due to poor people due to income distribution, so in what remains I go to present three Different case studies from three different countries analyze what happens to the poor every time a country opens its markets to trade and liberalizes its trade regime.

The first country to arrive is Vietnam. If you look at them, they are absolutely optimistic about the benefits of trade and also about wages. The effects of trade, statistical evidence proves them right in the last 15 years in Vietnam, poverty rates have decreased considerably at the same time Vietnam entered into the bilateral trade agreement with the United States to gain access to the huge American market and What statistical studies show us is that poverty was reduced especially in those regions that produced goods whose demand increased in the US due to this bilateral trade agreement, so basically the poor benefited from access to the US market of the US Vietnam ended up as a fairly large circle, so trade is a place Today the rule in its economy is twice as large as it was 15 years ago.

Not all examples are like this. India exists. India liberalized its trade regime in 1991 by opening its markets, considerably reducing the level of protection, but statistical studies failed to find beneficial effects for the economy. The poor document the opposite It defines that the poor did not do well in trade and one of the possible reasons that these studies identify could lie in the very rigid regulations of the labor market, so that the poor could not even enter certain sectors They couldn't even enter the labor market and couldn't change jobs and occupations when the shock hit them. The third case study I want to talk about is one I've been working on extensively and it's from Indonesia.

Indonesia is the first most populated country in the world. It is an extremely diverse and rapidly emerging economy, it has considerably liberalized its trade regime during the 90s, so it has opened its markets once again to trade, reducing the level of protection in the same way as in publishing, so that we are analyzing these effects, you are not gaining access to a foreign economy. market but rather reduce the protection of the markets themselves and what is going to happen to the poor. I would like to outline the effects of threading using the example of this textile worker.

This is a man sitting on the street in Yog Jakarta, Central Java, and working. on a batik shirt when import tariffs go down in his country because that's what trade liberalization means when import tariffs on textiles go down it means that textile products become cheaper in the jagarta market. Foreign textile products become cheaper throughout the market. put competitive pressure on his production this is going to be bad for him this is going to be detrimental to his income so we might think that it would be very important to protect him from these effects but then many other things are happening too not only is this shirt getting cheaper but also the thread that you are using, that you are using the fabric that you are using, potentially even the sewing machine, all these additional changes of cheap prices will make your production more efficient, will improve your income, so you have seen it. there is competitive pressure on him that is bad for him, but at the same time there are also productivity-enhancing effects that are good for him.

Furthermore, you will adjust your consumption because some prices change one way or another, so you will be able to afford more of some goods less of others than you are used to so we are interested in what happens to your well-being after If all these changes have occurred, then what to do about it, you could go to this man and ask him how he was affected by the trade and you would get a very strong and powerful narrative from him, but this narrative would still have posed a major problem, the Same as I found when I tried to challenge your opinions on international trade, this means that the experiences are very important, but they are not representative of what happened to poverty rates in Indonesia as a whole, so we would have to look at larger samples and representatives of the Indonesian population to understand what is going to happen with the reform of the poor in this country.

We did something like this. Come on, we are not looking at individual people but at regions of Indonesia and we are looking at the poverty rates in different regions, as well as the number of employees, so the labor market, the labor force participation rates, the salaries that are paid in these regions. and we are connecting all of these results to tariff reductions, we can do this because, although tariffs were being reduced for the country as a whole in the same way, they affected different regions differently depending on what these regions produced, what types of goods they produced.

Competitive pressures were different depending on what types of goods local industries purchased, so the productivity-enhancing effects were different. Interestingly, the results show us that competitive pressures are not statistically closely related to changes in poverty, changes in wages, and changes in any labor market. results, so it does not appear that increased competition has seriously affected the poor, at the same time that the productivity-enhancing effects are closely related to labor market outcomes, what does it basically tell us when companies that benefited from international trade, increased their productivity, did these local companies begin to employ more? workers, these local companies began paying higher wages.

Poverty rates were reduced in these regions, so overall we see that international trade has been beneficial to the poor in the case of Indonesia. Why then aren't Indonesians even more optimistic and enthusiastic about trade? There are many explanations for this, but one possible explanation could be that Indonesia was also hit around the same time, in 97-98, by the South Asian financial crisis, which hit the poor hard. This poses a challenge to our statistical analysis and we have to address it. With these additional questions, but in addition it also shows how difficult it is to disentangle different aspects of globalization to disentangle the trade effects of financial globalization from these three case studies.

What do we learn from them as economists? We need to take advantage of them more and more. and use the vast amount of data available to find out under what conditions the poor benefit from globalization, as they did in the case of Vietnam, as they did in the case of Indonesia, and under what conditions they lose out, as in the case of India, but Also, there is also a second message that I would like you to take home and this is basically when you think about globalization, there are so many powerful narratives that you can go back to, you can think about sweatshops that collapse and kill to hundreds of employees.

You can think ofchildren working in coal mines, you can think about horrible working conditions, these narratives are extremely important, of course, because they focus our attention on issues that matter, but at the same time, if these are the only narratives you take into account. then they are going to be lost, they are going to lose the benefits for hundreds and hundreds of millions of poor people who actually could have benefited from globalization, so in general, my messages whenever we have very strong emotional responses to specific issues are become extremely important. statistics a chance and also listen to the general evidence thank you foreigner