A Comprehensive Introduction to Regional Issues
Edited by Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai
Chapter 16: Economic Integration and Poverty
Hosaki Kono 16.1 INTRODUCTION For the last two decades, East Asian countries have experienced a move toward globalization and regional economic integration. While governments, industry and international institutions have promoted this move, it has been the target of NGO protests at every high-level international meeting on trade liberalization or globalization. Globalization, NGOs argue, benefits only the rich, leaving the poor behind. Theoretically, economic integration can create opportunities for employment and economic activities through economic development induced by agglomeration and concentrated dispersion (Chapters 2 and 3), increases in foreign direct investment (FDI, Chapter 5), and the expansion of trade (Chapter 13). However it is also possible that the inflow of more inexpensive products, resulting from concentrated dispersion, increases in FDI, and trade expansion, may lead to the defeat of local producers and have adverse effects on the poor. In the long-run when all the adjustment has been completed, those who lost their jobs or suffered significant income losses will find new opportunities and gain from economic development induced by economic integration, which can reduce aggregate poverty. However, in the short run, the adverse effects may dominate the economic development effects and economic integration may actually increase aggregate poverty, as argued by NGOs. There is also no guarantee that poor people in remote areas can enjoy the fruits of economic development. In this chapter, we present the existing empirical evidence on economic integration (especially trade expansion and increased FDI inflows) and poverty reduction with the purpose of facilitating discussion between advocates and...
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