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The Impact of Globalization in Promoting the Economic Development of Third World Country - Literature review Example

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The paper “The Impact of Globalization in Promoting the Economic Development of Third World Country” is an impressive example of macro & microeconomics literature review. Since globalization, there have been several arguments on whether globalization has had a positive effect on the economy of third-world countries or a negative effect…
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Extract of sample "The Impact of Globalization in Promoting the Economic Development of Third World Country"

Introduction

Since globalization, there have been several arguments on whether globalization has had a positive effect on the economy of the third world countries or a negative effect. To address this, the research the study is going to utilize the qualitative method which will entail going through several latest scholarly articles within the year 2000 and 2016. Some of the techniques that will be utilized by the study include pre-estimation test, Granger causality test, the estimation techniques and diagnostic test such as Engle-Granger co-integration, Augment Dickey Fuller, Error Correction Model, post estimation tests, and Ordinary Least square. To achieve the main goal of the research, the research easy will begin with the introduction, then the literature review, methodology, findings, conclusion, and then the referencing. The research will go through all this to address, the impact of globalization in promoting the economic development of third world country.

Literature review

When reflecting on the past, the third world countries were at a stunted growth and there was no evidence of any progress. The stunted growth experienced with the third world countries was basically because of the trade barriers that were put in place. However, with globalization most of the third world countries started experiencing growth in there economy. Hamdi, (2015) confirms that, with the introduction of globalization, the World Bank and the International Management mobilized the third world countries to undergo market reforms and essential change through large loans. It is true that most of the third world countries are poor and records the highest level of people who are poor. The high poverty level experienced was because their existed poor relationship between the third world countries and the developed nations. As a result, the third world countries were always depending in their little recourses with thought any assistant from the developed nations. However, this changed due to globalization as Hamdi, (2015) confirms that, globalization enabled developed countries to invest in the third world nations thus creating job opportunity for the poor people. Hamdi, (2015) confirmed the above statement by providing an example of the rapid growth that was experienced in India and China which resulted to a reduction in the worlds poverty level.

Globalization encouraged trade openness in most of the third world countries. Previously the slow growth that was experienced among most of the third world countries was as a result of lack of trade openness. Most of the third world countries set their tariffs so high thus restricted the distribution of the international trade. These high tariffs hindered some countries from sending exports to such countries and at the same time not receiving imports from such countries. Lack of trade openness was bone of the main issues that contributed to slow economic growth experienced in the third world countries. The study carried out in Nigeria by Feridun, Olusi & Folorunso (2006) confirms that trade openness had a significant positive effect on economic growth in Nigeria.

In 2015, Kilic did a research focusing on the effects of globalization in politics, economy and the social development of third world countries. In his analysis of the impact of globalization, Kilic used a concept referred to as the granger causality test. In using the granger test, Kilic also used a test called the fixed least effect squire method. This was a method that was used for purposes of determining the effects of globalization on the population of study that he was undertaking. Kilic carried out a study on 74 countries in the world, and this is between 1981 to 2011. This is a period when the notion of globalization was beginning to be studied. From the results of the study, the economic and political notions of globalization had a positive contribution to the countries under study. However, when it came to the social aspects of globalization, the study indicated that globalization had some negative effects. The is because globalization led to the erosion of the cultures of these countries in favor of the cultures of the developed and wealthy countries.

The study by Sulaiman, Aluko (n.d) was carried out to examine the effect of globalization on the economic performance of Nigeria, which is one of the developing nations. The method employed by the study was the Ordinary Least Square (OLS) which was majorly utilized to analyze the adopted model where by the Gross Domestic Product is utilized as a substitute to measure economic performance, and depends on the foreign direct investment, exchange rates and the degree of openness which are indices of globalization. The study confirmed that globalization has some positive effect in the Nigerian economic growth/ performance. Furthermore, the study recommended that the government should try their level best to provide a business friendly environment to encourage developed countries to invest in the country.

Another study carried out in Nigeria by Abolaji, Ajike, & Emmanuel (2015) was also focused in examining the impact of economic globalization on the output growth of the economy of Nigeria. The study utilized different econometric techniques like the estimation techniques, pre-estimation test, and diagnostic test such as Engle-Granger co-integration, post estimation tests, Augment Dickey Fuller, Ordinary Least square and Error Correction Model utilizing the data set with the years 1970 and 2013. The study also acknowledged that there exists a long-run connection between the interest rate, foreign direct investment (FDI), financial openness, exchange rate, inflation rate, trade openness, and real gross domestic product. The study confirmed that the growth rate of the Nigerian output is enhanced by a higher exchange rate, an increase in foreign direct investment, a lesser interest rate, higher inflation rate, and growth in financial and trade openness.

Leitao (2012) also talks extensively on issues pertaining to globalization. In his research, Leitao seeks to analyze the relationship existing between globalization and economic development. In the view of Leitao, it is globalization that has made it possible for third world countries to liberalize their economies, hence attracting foreign direct investments. It is these investments that play a role in developing the economy of a particular country.

Some of the third world countries majorly those found in the African continent do not have enough recourse to create wealth in their country. This is another factor that has contributed to the increase of the poverty level of such countries. One of the best examples is Rwanda which does not have resources as compared to other African countries. The article by Croix (n.d) confirms that, tourism provides the best alternative choice that can drive the growth of the Rwanda’s economy which does not have other alternative recourses like other African nations in this globalized world. The author further confirms that the development of tourism in Rwanda can contribute a lot to the country by attracting tourists and foreign investors, creation of job opportunity and contributing to national income. The study indicates that currently Rwanda is identified as one of the tourist’s destinations in Africa.

Globalization openness is one of the main factors that have contributed to the economic growth of the third world countries. The existence of trade openness in a given third world country encourages foreign investment and increase the level of employment in the third world countries and furthermore increases exportation and importation of goods and services. This is clearly proven by Meraj (2013) study in Bangladesh where he investigated the impact of globalization and openness in the economic growth and trade. The success of the study was because the author utilized econometric testing using an autoregressive distribution lag (ARDL) model and Granger causality test. The study confirmed that globalization openness was positively impacted to the economic growth of Bangladesh which is one of the third world nations. The study clearly shows that the openness of the third world countries trade will definitely result into the economic growth of that country.

There are some studies that argue that that globalization has resulted to the increase in the level of poverty among most of the third world countries. However, this might not be the case because several third world countries have integrated their economy to the global economy and are experiencing economic growth, increased job employment, and reduction in the level of poverty among its citizens. This statement is also supported by the study carried out by Hameed & Nazir (2009) in Pakistan with the aim of assessing the impact of economic globalization on inequality and poverty by focusing on the globalization’s aspect of trade liberalization. The study confirmed that Pakistan embarked on a path with the aim of integrating its economy with the global economy by liberalizing its trade regimes and investment expecting to improve the living standard of the poor and improve its economy. By utilizing Granger causality the result obtained confirmed that liberalization as increased job opportunity and Pakistan has benefited a lot from globalization.

The study carried out by Tisdell (2009) argues that it is not realistic to expect the economic globalization net benefits to represented by a sole monitory digit because it has a diverse consequences most of its consequences are doubtful. The profit of economic globalization is accessed in relation to its likely impact on the level commodities exchange and global production.

Methodology

This research utilized the qualitative method for data collation. For the success of this study, the study utilized some of the business database like accounting and assurance, best case, business expert press, and economic intelligent unit (EIU) to obtain the latest scholarly articles that rage from the year 2000 to 2016. The key word utilized by the study in these database included ‘globalization’, ‘Impact of globalization’, ‘Impact of globalization on the third world country’, ‘third world country’. After the research relevant articles were then identified by the study. Furthermore, the study went through the reference lists of the identified scholarly articles to, the reference list served as the springboard for the study. Of the all the scholarly articles that were identified, the only once that would be included in the review would be those with standard presentation and quality in relation to the method, design and sampling.

The study sample included about 74 third world countries. Some of the techniques that were utilized by the study were Granger causality test, pre-estimation test, the estimation techniques, diagnostic test such as Augment Dickey Fuller, Engle-Granger co-integration, Error Correction Model, Ordinary Least square, and post estimation tests to utilize the data set within 1970 to 2013.

Findings

The study found that though globalization has had some negative effect in some areas in various third world countries, it has a positive effect on the economic development of the third world countries. This positive effect has be as a resultant of globalization of the third world countries opening their trade to the global world.

Conclusion

Generally, globalization has had some positive effects of the economic growth of the third world countries. Before globalization these third world countries were experiencing a rise in the poverty level due to limited resources and unemployment. Presence of globalization has contributed to good relationship between the third world countries and the developed countries. In addition globalization has enable some of the third world countries like Rwanda who have limited recourses as compared to other African nations to realize that they can experience economic growth through tourism. The good relationship that has been brought by globalization has enabled the developed countries to invest in the third world countries. This has greatly improved the living standard of most of the poor people in the third world countries as it has created employment. Furthermore, globalization has resulted to the third world countries removing the high tariffs that have been a hindrance to the international trading. This has resulted to most of the third world countries experiencing an increase in the foreign investment thus providing job opportunities. An instant provided by the study is India and China who have been among the poorest countries, however, because of globalization; the two countries have experienced an increase in their economy and at the same time the reduction of the poverty level which resulted to the whole world recording a reduction in the poverty level.

Reference

Abolaji, A. A., Ajike, E. O., Emmanuel, M. K. (2015). Economic Globalization and Economic

Growth in the Developing Economies: A case of Nigerian Economy. International

journal of Economics, Commerce and management.

De la Croix Nkurayija, J. The Impact of Globalization on Africa’s Development: “Rwandan

Tourism as Key to Mobilize Revenue and Investment”.

Feridun, M., Olusi, J. O., & Folorunso, B. A. (2006). Analyzing the impact of globalization on

economic development in developing economies: an application of error correction

modelling (ECM) to Nigeria. Applied Economics and International Development, 6(3),

173-182.

Hamdi, F. (2015). The Impact of Globalization in the developing Countries. Web

<https://www.linkedin.com/pulse/impact-globalization-developing-countries-fairooz-

hamdi> accessed May 12, 2016.

Hameed, A., & Nazir, A. (2009). Economic Globalisation and Its Impact on Poverty and

Inequality: Evidence from Pakistan. ECO Economic Journal, 1.

Kilic, C. (2015). Effects of Globalization on Economic Growth: Panel Data Analysis for

Developing Countries. Petroleum-Gas University of Ploiesti Bulletin, Technical Series,

67(1).

Leitao, N. C. (2012). Economic Growth, Globalization, and Trade. Web <

http://mrp.ase.ro/no43/f2.pdf > accessed May 13, 2016.

Meraj, M. (2013). Impact of globalization and trade openness on economic growth in

Bangladesh. Ritsumeikan Journal of Asia Pacific Studies (RJAPS), 32, 40-50.

Sulaiman, L. A., & Aluko, O. A. Globalisation and Economic Performance in Developing

Nations: The Nigerian Experience.

Tisdell, C. (2009). Cost–Benefit Analysis of Economic Globalization. Chapters.

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