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Globalization, Trade and Poverty in Ghana

Charles Ackah and Ernest Aryeetey

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The persistence of poverty in Sub-Saharan Africa (SSA), in the face of increased globalization and rapid trade liberalization during the past two decades has inspired considerable debate on the impact of globalization, in general, and trade liberalization, in particular, on poverty. The standard argument is that global trade liberalization would lead to a rise in the incomes of unskilled labour in developing countries. In other words, since developing countries are more likely to have a comparative advantage in producing unskilled labour-intensive goods, one would expect trade reforms in these countries to be inherently pro-poor.

However, the experiences of many developing countries, particularly in SSA, have been disappointing and in many cases poverty has increased following trade liberalization. In Ghana, like many other SSA countries, poverty remains the fundamental problem confronting policymakers. Yet, between 1991 and 2006, the headcount index of poverty fell by 23.2 percentage points with the proportion of the population living below the national poverty line falling from 51.7% in 1991/92 to 28.5% in 2005/06. Trade liberalization and resulting export growth have been an important part of the story.

The editors

Charles Ackah, a development economist, is a Research Fellow with the Institute of Statistical, Social and Economic Research (ISSER), University of Ghana, Legon. He worked previously with the World Bank in Washington DC.

Ernest Aryeetey is a professor of economics and Vice-Chancellor of the University of Ghana and Director of its Institute of Statistical, Social and Economic Research. He was previously a Senior Fellow and Director of the Africa Growth Initiative at the Brookings Institution, Washington, DC.