Print | Back

Skip to Content

UNU-WIDER Logo

30 Years of economics for development

Globalization and the Human Development Trap

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 assymetries 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.
Publisher:
UNU-WIDER
Series:
WIDER Research Paper
Volume:
2007/64
Title:
Globalization and the Human Development Trap
Authors:
David Mayer-Foulkes
Publication date:
October 2007
ISSN Web:
1810-2611
ISBN 13 Web:
9789292300135
Copyright holder:
© UNU-WIDER
Copyright year:
2007
Keywords:
trade, investment, technology
JEL:
O16, O33
Project:
Impact of Globalization on the World's Poor
Sponsor:
UNU-WIDER gratefully acknowledges the financial contribution of the Finnish Ministry of Foreign Affairs to this project.
Format:
online