Chart of the Week: Distribution of Globalization’s Gains

IMF Blog, May 31, 2018

Source details

IMF Working Paper: The Distribution of Gains from Globalization, by Marina Mendes Tavares and Valentin F. Lang.
Sample: 147 countries from 1970 to 2014.
Main finding: Globalization is generally good for economic growth but exhibits diminishing marginal returns — the less integrated a country is into the global economy, the larger the positive impact from additional globalization.

The black line in the chart shows the effects on a country’s five-year growth rate from a one-point increase in economic globalization.
Low-income countries (example: Ethiopia, shown on the far left) have larger potential growth gains from additional globalization.
Advanced economies (example: United States, shown on the far right) still gain from globalization, but the expected gains are lower than for poor and emerging market economies.
The chart indicates levels of globalization and potential growth gains for countries such as India, Brazil, China, and Russia.

The study evaluates how income gains are distributed within countries and finds:
- Globalization is often associated with widening economic inequality.
- In many advanced economies, globalization often has little effect on the incomes of the poor.
- In the average developing economy, both the poor and the wealthy benefit from globalization.

Government policies can make globalization’s gains more inclusive:
- Investments in education that raise skill levels.
- Taxes and transfers that spread benefits more broadly.
Such policies can help globalization fulfill its promise of generating gains for all.

Source: IMF blog post “Chart of the Week: Distribution of Globalization’s Gains” (May 31, 2018).