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The Social Impact of Globalisation in the Developing Countries

Eddy Lee and Marco Vivarelli

CSGR Working Paper 199/06 


In this paper an ex-post measurable definition of globalisation has been used, namely increasing trade openness and FDI. A general result is that the optimistic Heckscher-Ohlin/Stolper-Samuelson predictions do not apply, that is neither employment creation nor the decrease in within-country inequality are automatically assured by increasing trade and FDI.

The other main findings of the paper are that:

1) The employment effect can be very diverse in different areas of the world, giving raise to concentration and marginalisation phenomena;

2) Increasing trade and FDI do not emerge as the main culprits of increasing within-country income innequality in DCs, although some evidence emerges that import of capital goods may imply an increase in innequality via skill-biased technological change;

3) Increasing trade seems to foster economic growth and absolute poverty alleviation, although some important counter-examples emerge.