Globalisation and Income Gap between Rich and Poor Nations

Abstract

Set against the background of initial relatively low cross-country income and considerable poverty and deprivation in Sub-Saharan Africa (SSA), the question of whether globalisation is associated with a 'catching up' in terms of real income growth, in absolute and relative terms, is both relevant and important. This paper contributes to the empirical literature by investigating globalisation as a channel of income gap reduction between SSA and developed countries. We employ Globalisation Indexes from the Konjunkturforschungsstelle (KOF) and the Centre for the Study of Globalisation and Regionalisation (CSGR) in an Arellano-Bond dynamic panel GMM specification to test the hypothesis that globalisation has reduced the income gap between SSA and developed countries. We find no evidence that globalisation is associated with a reduction between SSA and developed countries over the period 1980-2009. This result is consistent with previous studies on country's absorptive capacity. An implication of this result for policy theorists is that structural features of SSA output require a more heterodox approach to all dimensions of human development.