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

Today I'm going to talk about emotions and opinions, but I'm also going to talk about statistical

evidence

and I'm going to argue that statistical

evidence

is especially important when we're thinking about problems. The tree is very strong emotions in us, so let's first start with emotions when you listen to world

globalization

, what are the images that come to mind? Do you think of huge container ships that go around the world and transport tons and tons of merchandise? Do you think of financial centers that operate 24 hours a day or do you think like me of the shiny shopping malls of Southeast Asia well stocked with Western brands whose products have been produced somewhere nearby or does the word remind you more of mass protests? ?

Does it make you feel worried about environmental damage or worried about shocking working conditions inspecting workshops that produce for the world market we all have very different images in our minds, some of them quite neutral or even optimistic others more likely negatively charged of it all . I would like to restrict our attention in 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 a very strong opinion. Actually, I think only about one person in ten sitting in this theater would think that Germany's growing business and trade languages ​​with the rest of the world is a bad thing, the other nine would consider them a source of or even very good now seeing this.

Potentially I just made a big mistake. I use data from nationally representative opinion polls to describe their own views. sure you're not, you're a very self-chosen group of people, if nothing else, you were willing to sit through an entire night of TEDx talks, which is pretty non-average behavior makes you more or less care about globalization. I honestly don't know, but the point I wanted to make is that even then, we're thinking about things as simple as your opinions. It is very important to make statistics or take statistics. seriously to be able to draw meaningful conclusions for me it's even more important to take statistics seriously because I'm interested in understanding the effects of globalization and understanding the effects of international trade so I was a researcher and an economist and especially interested in a question : what does international trade bring to people around the world and what are the benefits of international trade for people around the world?

Does international trade especially benefit

poor

people in developing countries? some benefits for international trade for a country as a whole, but I would also tell you that some people are going to earn more, others are going to earn less and others even lose from it, basic economic theories predict, but especially those people are going to win from globalization owning something that is more precious globally than locally so in a high income country these are going to be highly skilled worker capitalists who are going to be the main beneficiaries of trade in a low income country these are going to be workers low-skilled people who are abundant locally but relatively rare globally, sir, this simple economic argument lies at the bottom of many economists' expectation that the

poor

should really benefit from international trade around the world, but if this actually happens and whether this actually happens is an empirical question, so in the rest of the talk I like to I'd like to show you some empirical evidence on this, but before I get into that first, I'd still like to talk about opinion, so what you see here is basically opinion poll data recent opinion poll data c compiled by the Pew Research Center based in statistically representative national opinion polls on the vertical axis is the proportion of people who agree that their own country's growing trade and business ties with the rest of the world are a good thing on the horizontal axis is the proportion of people who think that trade will increase wages each circle represents the country the size of the circle shows the importance of trade in the economy of that country it is basically the volume of trade divided by the total volume of production the first thing you might notice is that people's support for globalization is not independent of what they think about the wage effects of globalization. tray, but there is quite a bit of variation up there, so you can see the German treatments. pretty optimistic about the overall benefits of trading which was the nine out of ten i was using before but are pretty suspicious and skeptical when it comes to the w age effects of trading and you are not alone in this if you

look

at most of the high-income countries, I denoted them in darker shaded circles, you'll see that people are generally more suspicious about what will happen to international trade wages as we begin to move into poorer and poorer countries and the colors become more and more pale, it is seen that more and more people expect benefits from trade, especially in wages.

Developing countries should be the ones to benefit from trade in terms of wages, but can we do better than this? we have data from household surveys business surveys labor market surveys from many countries around the world for many different time periods we can use this data i To investigate and understand what international trade does to people because the poor enter income distribution, and for what remains I'm going to present three different case studies from three different countries

look

ing at what happens to the poor every time a country opens its markets to trade liberalizes its trade regime the first country is Vietnam if you look at them absolutely optimistic about the benefits of trade also about the wage effects of trade statistical evidence gives them some reason in the last 15 years in Vietnam poverty rates have dropped considerably at the same time Vietnam entered the trade deal bilateral with the US gaining access to the huge US market and statistical studies icos show that poverty has been reduced, especially in those regions that produced goods for which the demand increased in the US.

Because of this bilateral trade agreement, basically, the poor benefited from access to the US market from the US. ., Vietnam ended up being a pretty big circle, which is why trade plays as big a role in its economy today as it did 15 years ago. Not all examples are like this. is India India liberalized its trade regime in 1991 by opening up its markets by significantly reducing the level of protection, but statistical studies failing to find beneficial effects for the poor document the opposite, the finding that trade did not fare well for the poor and one of the potential reasons that the studies identified 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. They couldn't change jobs and occupations when he hit them. The third case study I want to talk about one that I've been working on extensively and it's from Indonesia. Indonesia is the FIR, the fourth most populous country in the world, it is an extremely div country. Erse emerging economy has rapidly liberalized its trade regime considerably during the 1990s, so it has opened its markets once again to trade, it reduces the level of protection as well as editing, so we are looking at these effects. market, but rather reducing the protection of the markets themselves and what will happen to the poor.

I would like to outline the effects of this trade liberalization using the example of this garment worker. This is a man sitting at work from Jakarta in Central Java on the street and working on a Baltic shirt when import tariffs go down in his country because that is what trade liberalization means when import tariffs on textiles go down means textiles become cheaper at work Joe Carter markets textiles but cheaper at home market this is going to put competitive pressure on his production this is going to be bad for him this is going to be bad for his income so we might think it wouldn't It would be very important to protect you from these effects, but in addition there's a lot of other things going on, not just this shirt is getting cheaper, but also the thread you use, the fabric you use, potentially even the sue-all machine this.

The additional cheap price changes will make his production more efficient and improve his income, so he's seen that there's competitive pressure on him that's bad for him, but at the same time there are also productivity-enhancing effects that are good for him. Furthermore, you are going to adjust your consumption because some price has changed one way or another, so you will be able to pay more for some goods less for others than you are used to what we are interested in is what happens to your well-being after All these changes have occurred, so 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 out of him, but hello. The narrative would still have posed a major problem. The same thing I found when I tried to question his views on international trade. This man's experiences are very important, but they are not representative of what happened to poverty rates in Indonesia as a whole. stress, so instead we would have to look at larger samples of larger, more representative samples represented from the population of Indonesia to understand what's going to happen to the overall poor in this country, so we did something like this, come on, We are not looking for individuals, but rather in regions of Indonesia and we are looking at poverty rates in different regions, as well as the number of employees, so the labor market, labor force participation rates, wages that are paid in these regions and we are connecting all these results to the tariff reductions that we can do this because although the tariffs were being reduced for the country as a whole in the same way they were affecting different regions di Depending on what these regions were producing and the types of goods they were producing, the competitive pressures would be different depending on the types of goods. local industries would buy, so the productivity-enhancing effects would be very different.

Interestingly, the results show us that competitive pressures are not statistically closely related to changes in poverty to changes in wages to changes in labor market outcomes so there does not appear to be an effect of increasing competition that the poor do poorly. at the same time the productivity-enhancing effects are closely related to labor market outcomes, what does it say? Basically, when companies benefited from international trade they increased their productivity, these local companies started employing more workers, these local companies started paying higher wages, poverty rates went down in these regions, so overall , we see that international trade has been beneficial to the poor in the case of Indonesia, why aren't Indonesians even more optimal? stic and enthusiastic about trade there Mai these many explanations for this but one possible explanation could be that Indonesia was also hit during around the same time in 97-98 by the South Asian financial crisis which hit the poor badly this It poses a challenge for our statistical analysis and we have to deal with these additional problems, but in addition it also shows how difficult it is to disentangle the 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 that we need to do more and more of them and use the vast amount of data available to learn in rich conditions do the poor benefit from globalization as they did in the case of vietnam as they did in the case of indonesia and what conditions make them really lose as in the case of India, but there is also a second message that I like I would like you to take home and basically it's When you think about globalization, there are so many powerful narratives that you can go back to.

You can think of sweatshops collapsing and killing hundreds of employees. You can think of children who work in coal mines. You can think of horrible working conditions. These are not the deities. they are extremely important, of course, because they focus our attention on issues that matter, but at the same time, if these are the only negative aspects that are taken into account, the benefits for hundreds and hundreds of millions of poor people that could actually be lost will be lost. have benefited from globalization, so in general mymessage is that whenever we have very strong emotional responses to specific problems, it becomes extremely important to give the statistics a chance and also listen to the general evidence, thank you