Abstract
Despite remarkable progress in the fight against poverty during the past few decades, the proportion of the poor living in developing countries is still on the high side. Many countries have promoted integration as an important development strategy; however, its impact on welfare of the poor is still unclear. In this study, we examine the roles of education and health dimensions of human capital in globalization and its impact on the poverty gap and the child mortality rate using cross-country panel data covering 110 developing countries between 1970 and 2015. We use a model based on system generalized method of moments (SGMM) to control for unobserved heterogeneity and potential endogeneity of the explanatory variables. The empirical results reveal that globalization reduces poverty gap and child mortality rate, and that an increase in the stock of human capital in developing economies improves welfare outcomes. The study also finds that human capital strengthens the negative impact of globalization on poverty gap and child mortality rate. For example, should enrollment in secondary school in Nigeria (in 2013) be increased from 39.2% to 61.6%, on average, it could translate into 2508 fewer under-five child deaths. We recommend that interconnectedness and promotion of human capital development should constitute a fundamental component of policy mix targeted at enhancing reduction of poverty and child mortality rate in developing countries.
Highlights
Despite remarkable progress in the global fight against impoverishment in the last decades, the proportion of the world population living in extreme poverty remains inadmissibly high.As indicated by the World Bank, with more than 700 million people living on $1.90 or less a day, and more than 300 million people living on less than $2.50 a day in 2015, the reduction of poverty remains a foremost global concern (World Bank 2017)
Our results suggest that globalization leads to reduction of poverty gap and child mortality rate in developing countries
We find that human capital strengthens the negative impact of globalization on poverty gap and child mortality rate
Summary
Despite remarkable progress in the global fight against impoverishment in the last decades, the proportion of the world population living in extreme poverty remains inadmissibly high. It is widely agreed upon that economic globalization is key for the transfer of technology for improved workforce productivity; in the absence of quality health capital (for example, good national health care services), globalization may not be able to create welfare improvement opportunities for citizens who have poor health due to loss in work hours, incapacity, and reduction in workers’ physical and mental capacities In line with this argument, Bloom et al (2004), Ogundari and Abdulai (2014), and Ogundari and Awokuse (2018) argued that citizens who are healthier are more likely to have the mental capacities to absorb technical innovations and put them to use than less healthy citizens, suggesting that health capital plays an important role in the potential effects of globalization on productivity of workers, which has strong implications for their welfare
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