Attacking Poverty: Is It Globalisation?… Or Is It the Institutions?

We empirically analyze the relationship between globalisation and poverty. Deviating from the mainstream literature, we use ‘synthetic’ globalisation and poverty indicators, which combine multiple single indicators into single-valued statistics. Further, we study a sample that includes OECD countries as well as non-OECD countries, which allows us to examine the effect of structural differences between countries (summarized in a OECD dummy). Our results reveal no significant effect of globalisation on poverty when correcting for the OECD effect. We argue that this suggests institutional quality as a more fundamental determinant of a country’s poverty performance than the degree of integration with the global economy. On the methodological level, our use of synthetic indicators entails a parsimonious specification of the globalisation-poverty relationship, which increases its transparency.