The Impact of Globalisation on Poverty and Income Inequality

Abstract

This paper investigates the impact of globalisation on poverty and on income inequality for 32 African countries. The key result is that globalisation increases poverty and income inequality in African countries. Further results show that financial deepening, human capital development and an improvement in health status of the general population decrease poverty and income inequality. These results yield some policy implications. First, policy makers should develop skills of the poor through substantial investment in their education. Skills development initiatives should have a global focus and it should be dynamic. It should be informed by the needs of the day and a particular country’s comparative advantage. Second, policy makers should improve the accessibility of the poor to credit through dismantling the widespread credit constraints. Third, since globalisation increases poverty and income inequality, there is need for adequate safety nets that may cushion the poor from economic shocks induced by globalisation. Finally, since an improvement of health of the general population reduces poverty and inequality, African countries should invest more resources in the health sector in order to ensure universal availability of health care services.