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Growth Effects of Globalization in the Low Income
African Countries: A Systems GMM Panel Data Approach

B. Bhaskara Rao

School of Economics and Finance

University of Western Sydney, Sydney, Australia
[email protected]

and

Krishna Chaitanya Vadlamannati

Development Economics & International Economics
University of Goettingen, Goettingen, Germany
[email protected]

ABSTRACT

The relationship between globalization and economic growth in the developing countries
remains controversial. Liberals argue that globalization will lead to higher economic growth
and prosperity. Skeptics contend the opposite, where globalization processes might lead to
increased inequality and lower economic growth. Previous studies have examined this issue
with single indicators such as trade openness or foreign direct investment (FDI) or aid etc.
In this study we make use of a comprehensive measure of globalization developed by
Dreher (2006), which measures globalization along three important dimensions viz.,
economic, political, and social fields to assess the pros and cons of globalization. Our panel
data results with a systems based GMM (SGMM) method show a small but significant
positive association between globalization and economic growth for a panel of 21 low
income African countries for the period 1970 - 2005.

Keywords: Globalization, Economic growth, Solow model, Africa

JEL: : N1, O1, O4, O57

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