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Globanization

Global and Local Connectivity and Spatial Development

Ejaz Ghani's picture

With William Kerr and Alexander Segura.

Developing countries have become much more globally integrated. On a global dimension, they now trade a lot more with other countries than they did two decades ago. Domestic connectivity at the country level has been helped through investments in road networks as urban and rural areas are becoming better connected not just through roads but phones lines and faster flows of knowledge.

How global and local connectivity influence spatial development and distribution of jobs is a tricky question. A naïve approach might look industry-by-industry at their exposure to trade or highways and ask what happens to the average wage in the industry as highways form.  This approach, however, risks confounding several forces.  It could be, for example, that a decline in the average wage represents a positive outcome if 1) those firms and workers who were already in the industry are experiencing wage growth, and 2) the industry overall expands to pull in workers from subsistence agriculture.  A declining average wage can signify the second factor is dominating the first factor, but this might be cause for celebration by policy makers rather than a source of concern.