Chapter

Globalization and the Human Development Trap

David Mayer‐Foulkes

in The Poor under Globalization in Asia, Latin America, and Africa

Published in print May 2010 | ISBN: 9780199584758
Published online September 2010 | e-ISBN: 9780191594533 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199584758.003.0002

Series: WIDER Studies in Development Economics

Globalization and the Human Development Trap

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The feeble results of liberalization policies in Latin America are explained in terms of a multiple steady state model including a dynamic human development trap, endogenous technological change, technology transfer, and trade. Divergent and convergent steady states, with and without a human development trap, exist under both autarchy and free trade. The model explains why import substitution is inferior to export promotion. While globalization is a necessary condition for convergence to development, it is not sufficient. Both trade and foreign direct investment create innovation asymmetries hindering lagging countries that need to be balanced with export promotion and technological transfer for their successful integration with the global economy. In addition, so long as the human development trap persists, unskilled and skilled workers will have a conflict of interest between supporting human capital investment and innovation. If only innovation is supported, the human capital trap will persist. If mainly human capital investment is pursued, technology levels will fall behind; switching to innovation will be necessary eventually. The world growth rate is maximized by regulating globalization so as to attain development in all countries.

Keywords: investment; technology; trade

Chapter.  12382 words.  Illustrated.

Subjects: Economic Development and Growth

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