Globalization Effects on Sub-Saharan Africa: The Impact of International Trade on Poverty and Inequality

Abstract

In a context of growing cooperation marked by increasing international transactions, the international trade which is a key component of globalization occupied a non-negligible position. Considering the divergence of ideas about the impact of international trade on countries, this paper focuses on the effect of globalization, through international trade, on poverty and inequality in selected developing countries. To do so, three types of (simple and multiple) linear regression models were set namely a naive model which includes only one dependent variable, a standard model and an improved standard model including respectively one and two control variables. The ratio of external trade (sum of exports and imports related to GDP) captured openness in international trade, our main explanatory variable. Poverty was caught using three indicators from the FGT family and inequality by the GINI index. With these variables, we tried to see if there is any relationship between international trade and poverty on the one hand, and between international trade and inequality on the other hand. The findings showed that of the three predefined models only the last two ones were significant to conduct our analysis. Thus, it appeared that international trade, hence globalization, contributes to reducing poverty and inequalities in developing countries. In other words, in these developing countries, increasing openness to international trade goes with a sharp decrease in poverty and inequalities, all other things being equal.