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

foreign s and opinions but additionally I'm also going to talk about statistical evidence and I'm going to argue that statistical evidence is especially important whenever we are thinking about issues the three is very strong emotions in US so first let's start with emotions when you hear the world globalization what are the images that come to your mind do you think of huge container ships going around the world and shipping tons and tons of goods do you think of Financial Centers operating around the clock or do you think as I do of shiny shopping malls in Southeast Asia well-stocked on Western Brands the products for which have been produced somewhere nearby or does the word rather remind you of mass protests does it make you feel concerned concerned about environmental damages or concerned about shocking working conditions in Spec shops producing for the world market all of us have very different pictures in our mind some of them rather neutral or even optimistic others more likely negatively charged from all this I would like to restrict or constraint your attention to one major element of globalization which is international trade and I would like to make you think about International Trade I would assume that you do not have very strong views on it actually I would think that only one person out of every 10 sitting in this theater would think that the growing trade and business languages of Germany with the rest of the world are rather a bad thing the other nine would consider them sort of or even very good Now by saying this I potentially just made a major mistake I use nationally representative opinion pool data to describe your own views by doing that I implicitly assumed that your representative slice of adult German population I'm sorry to tell you I'm very sure that you are not you are a very self-selected group of people if nothing else you were willing to sit through a whole evening of tedx talks which is a rather non-average Behavior does it make you more or less concerned about globalization I frankly don't know but the point I wanted to make that even when we are thinking about such simple issues as your opinions it is very important to make statistics or to take statistics seriously in order to be able to make me to come to 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 I'm as a researcher and Economist and especially interested in the question what does international trade bring to people around the world and does international trade benefit people around the world especially does international trade benefit poor people in developing countries if you ask an economist this question he would most likely tell you there must be some benefits to International Trade to a country as a whole but he would also tell you that some people are going to gain more others gain less and others even lose from it basic economic theories predict that especially those people are going to gain from globalization who owns something which is more precious globally than it is locally so in a high income country these are going to be capitalists high-skilled workers who are going to be the main beneficiaries from trade in a low-income country these are going to be low-skilled workers who are locally plenty but globally relatively scarce this simple economic argument is lies at the bottom of the expectation by many economists that the poor should actually benefit from International Trade around the world but whether this really happens and that it is really occurs it is an empirical question and so in the remainder of the talk I would like to show you some empirical evidence on this but before going into that first I still would like to talk about opinions so what you see here is basically opinion poll data recent opinionable data collected by the Pew Research Center based on statistically representative National opinion pulse surveys on the vertical axis you see the share of people who agree that the growing trade and business ties of their own country with the rest of the world are sort of a good thing on the horizontal axis you see the share of people who think that trade is going to increase wages each circle represents the country the size of the circle shows you how important trade is in that country's economy it's basically the volume of trade divided by the total volume of production the first thing that you may be able to 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 Germans are pretty optimistic about the overall benefits from trade that was a 9 out of 10 that I was using before but they are rather suspicious and skeptical when it comes to the wage effects of trade and they are not alone on this if you look at most high income countries I denoted them in Darker shaded circles you see that people are generally more suspicious about what is going to happen to wages from international trade as we start moving towards poorer and poor countries and the colors become paler and paler you see that more and more people expect benefits from trade to occur especially to wages this is actually surprisingly it goes in line with what economic the 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 luckily we can do much better than this we have enormous amounts of data available by now from micro level we have data from household surveys firm surveys labor market surveys from many countries around the world for many different time periods we can use this data in order to investigate and understand what does international trade do to people due to the poor due to income distribution and so in what remains I'm going to present three different case studies from three different countries looking at what happens to the poor whenever a country opens up its markets to trade liberalizes its trade regime the first country up there is Vietnam if you look at them absolutely optimistic about the benefits from trade also about the wage effects of trade statistical evidence proves them sort of right in the last 15 years in Vietnam poverty rates have decreased considerably at the same time Vietnam entered the bilateral trade agreement with U.S gaining access to the huge American market and what statistical studies shows that show us is that poverty reduced especially in those regions that were producing goods for which the demand increased in the U.S due to this bilateral trade agreement so basically the poor benefited from getting access to the U.S American Market Vietnam ended up as a pretty large Circle so trade place a twice as large rule in its economy today than it did 15 years ago not all examples are like this there is India India liberalizes trade regime in 1991 by opening up its markets reducing the level of protection considerably but statistical studies failed to find beneficial effects to the poor document the reverse Define that the poor did not fare well from trade and one of the potential reasons that these studies identify could lie in the very rigid labor market regulations so that the poor couldn't even enter certain sectors couldn't even enter the labor market couldn't switch jobs and occupations when the shock hit them the third case study I want to talk about is one I have been working on extensively and it is from Indonesia Indonesia is the fir the world's fourth most populous country it is a extremely diverse quickly emerging economy it has liberalized its trade regime during the 90s considerably so it's opened up its markets once again to trade reduce the level of protection just the same as in the edit so we are looking at these effects it's not gaining access to a foreign market but rather reducing protection of owned markets and what is going to happen to the poor I would like to sketch the effects of the threadabilization using the example of this textile worker this is a man sitting in yog Jakarta in Central Java on the street and working on a batik shirt when import tariffs go down in his country because that's what me what trade liberalization means when import tariffs on textiles go down it means that textile products get cheaper in the jagarta market foreign textile Goods get cheaper in the whole Market this is going to put a competitive pressure on his production this is going to be bad for him this is going to be harmful for his income so we could think that it would be very important to protect him from these effects but additionally many other things happen as well not only this shirt is getting cheaper but also the yarn that he's using that he's using the fabric that he's using potentially even the sewing machine all these additional cheap price changes are going to make his production more efficient are going to improve his income so you have seen there is a competitive pressure on him which is bad for him but at the same time there are also productivity enhancing effects which are good for him additionally he is going to adjust his consumption because some prices change this way or that way so he's going to be able to afford more from some Goods less from others than he's used to what we are interested in what happens to his welfare after all these changes have taken place so what to do about this he could go to this man and ask him about how he was affected by trade and he would get a very strong and powerful narrative from him but this narrative would have still proposes a major problem the same thing that I encountered when I tried to second guess your opinions about international trade this meant experiences are very important but they are not representative about what happened to Poverty rates in Indonesia as a whole so instead we would have to look at larger samples of represented larger and representative samples of Indonesian population in order to understand what is going to happen to the poor overhaul in this country so we did something like this we are going we are looking not at people individuals but rather Indonesian regions and we are looking at poverty rates in different regions as well as the number of employed so labor market labor force participation rates wages that are paid in these regions and we are connecting all these outcomes the Tariff reductions we can do this because although the tariffs were reducing for the country as a whole the same way they were affecting different regions differently depending on what these regions were producing what types of goods they were producing so the competitive pressures were different depending on what types of goods local industries were buying so the productivity enhancing effects were different interestingly the results show us that the competitive pressures are not closely statistically related to changes in poverty to changes in wages to changes in any labor market outcomes so it does not look like increasing competition affected the poor badly at the same time the productivity enhancing effects are closely related to labor market outcomes what does it tell us basically when firms benefited from International Trade increased their productivity these local firms started to employ more workers these local firms started to pay higher wages poverty rates reduced in these regions so overall we see that International Trade has been beneficial to the poor in the case of Indonesia why aren't then the Indonesians even more optimistic and enthusiastic about trade there might be as many explanations for this but one potential explanation could be that Indonesia was also hit during almost the same time in 97-98 by the South Asian financial crisis which affected the poor very badly this poses a challenge to our statistical analysis and we have to deal with these additional issues but additionally it also shows how difficult it is to disentangle different aspects of globalization to disentangle the effects of trade from Financial globalization from these three case studies what do we learn from them as economists we need to make more and more of them and use the vast amounts of data available to learn under which conditions do the poor benefit from globalization as they did in the case of Vietnam as they did in the case of Indonesia and which conditions make them actually lose out like in the case of India but additionally there is also a second message I would like you to have to take home with you and this is basically when you are thinking about globalization there are so many powerful narratives that you can go back to you can think of collapsing sweatshops killing hundreds of employees you can think of kids working in Coal Mines you can think of Horrid working conditions these are these narratives are extremely important of course because they focus our attention to issues that matter but at the same time if these are the only narratives that you take into account then you are going to miss out you are going to miss out on benefits to hundreds and hundreds of millions of poor who actually might have benefited from globalization so overall my messages whenever we have very strong emotional responses to specific issues it becomes extremely important to give statistics a chance and to also listen to the overall evidence thank you foreign

Channel: TEDx Talks

Views: 148,621

Keywords: tedx, English, Germany, tedx talks, TEDxTalks, ted talks, ted x, Public Policy, Development/Philanthropy, tedx talk, Economics, ted talk, Global Issues, ted

Id: dIldvz0jygE

Length: 15min 33sec (933 seconds)

Published: Mon Dec 01 2014