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Globalization and the Race to the Bottom in Developing Countries

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 (ISBN-13: 9780521715034)

Globalization and the Race to the Bottom in Developing Countries
Cambridge University Press
9780521886987 - Globalization and the Race to the Bottom in Developing Countries - Who Really Gets Hurt? - By Nita Rudra
Frontmatter/Prelims

Globalization and the Race to the Bottom in Developing Countries

The advance of economic globalization has led many academics, policy-makers, and activists to warn that it leads to a “race to the bottom.” In a world increasingly free of restrictions on trade and capital flows, developing nations that cut public services are risking detrimental effects to the populace. Conventional wisdom suggests that it is the poorer members of these societies who stand to lose the most from these pressures on welfare protections, but this new study argues for a more complex conceptualization of the subject. Nita Rudra demonstrates how and why domestic institutions in developing nations have historically ignored the social needs of the poor; globalization neither takes away nor advances what never existed in the first place. It has been the lower- and upper-middle classes who have benefited the most from welfare systems and, consequently, it is they who are most vulnerable to globalization’s race to the bottom.

Nita Rudra is an Assistant Professor of International Affairs in the Graduate School of Public and International Affairs at the University of Pittsburgh.


Globalization and the Race to the Bottom in Developing Countries

Who Really Gets Hurt?

Nita Rudra


CAMBRIDGE UNIVERSITY PRESS
Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo, Delhi

Cambridge University Press
The Edinburgh Building, Cambridge CB2 8RU, UK

Published in the United States of America by Cambridge University Press, New York

www.cambridge.org
Information on this title: www.cambridge.org/9780521715034

© Nita Rudra 2008

This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press.

First published 2008

Printed in the United Kingdom at the University Press, Cambridge

A catalogue record for this publication is available from the British Library

Library of Congress Cataloguing in Publication data

Rudra, Nita.
Globalization and the race to the bottom in developing countries: who really gets hurt? / Nita Rudra.
p. cm.
Includes bibliographical references.
ISBN 978-0-521-88698-7
1. Globalization – Economic aspects – Developing countries. 2. Globalization –
Social aspects – Developing countries. 3. Developing countries – Social policy.
I. Title.
HC59.7.R763 2008
303.48'2–dc22
2008019384

ISBN 978-0-521-88698-7 hardback
ISBN 978-0-521-71503-4 paperback

Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this book, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate.


For my parents, Sujit and Lina Rudra


Contents

List of figures
xi
List of tables
xiii
Preface
xv
1       Introduction
1
1.1     Globalization and the race to the bottom debate: the fundamental concern
5
1.2     The focus and plan of the book
11
1.3     Contributions
17
2       The race to the bottom in developing countries
19
2.1     Existing literature on the globalization–welfare state nexus
20
2.2     Globalization, labor and the race to the bottom in developing countries
24
2.3     The evidence
26
2.3.1   Contrasting trends in globalization and welfare: rich versus poor nations
26
2.3.2   LDC labor in a globalizing economy
30
2.3.3   Model specification
35
2.3.4   The variables
36
2.3.5   Results
39
2.4     Summary
46
3       Who really gets hurt?
48
3.1     Importance of the distributive effects of social spending in developing nations
51
3.1.1   Links between globalization, welfare spending, and inequality in OECD countries
52
3.1.2   The link between globalization, welfare spending, and inequality in LDCs
54
3.2     The base model: the effects of globalization and social spending on income distribution
56
3.2.1   The dependent variable: income distribution
57
3.2.2   Independent variables
59
3.2.3   Results
61
3.3     Globalization and prospects for equity-enhancing reform
65
3.4     Robustness checks
67
3.5     Interpretation of results: the role of government–labor relations, information, and interests
68
3.6     Summary
73
4       LDC welfare states: convergence? What are the implications?
75
4.1     Welfare states in developing countries? The existing literature
77
4.2     Contemplating systematic divergence in LDCs: patterns of welfare regimes
80
4.2.1   Questioning CPE convergence: why LDCs are likely to have welfare states
80
4.2.2   Questioning IPE convergence: twentieth-century globalization and different LDC welfare regimes
82
4.2.3   Delineating different welfare regimes in developing countries
84
4.2.4   Cluster analysis: testing contrasting hypotheses
89
4.3     Analysis results
95
4.3.1   Robustness checks
102
4.4     Initial interpretation of the results
103
4.5     Implications
106
5       Globalization and the protective welfare state: case study of India
108
5.1     India’s protective welfare state
111
5.2     Race to the bottom?
114
5.2.1   Social security
116
5.2.2   Health care and education
118
5.2.3   Summary
119
5.3     Institutional change
120
5.3.1   Welfare regime change?
120
5.3.2   Mediating role of domestic institutions
124
5.4     Who really gets hurt?
130
5.4.1   Social security
131
5.4.2   Health care
133
5.4.3   Education
134
5.4.4   Summary
137
5.5     Other factors: democracy, ethnic fragmentation, and culture
138
5.6     Implications
140
6       Globalization and the productive welfare state: case study of South Korea
142
6.1     South Korea’s productive welfare state
143
6.2     Race to the bottom
149
6.2.1   Social security
150
6.2.2   Labor market protections
153
6.2.3   Summary
155
6.3     Institutional change
155
6.3.1   Welfare regime change?
156
6.3.2   Mediating role of domestic institutions
159
6.4     Who really gets hurt?
165
6.4.1   Labor market protections
166
6.4.2   Social security (and social assistance)
167
6.4.3   Health care
169
6.4.4   Education
170
6.4.5   Summary
174
6.5     Other factors: democracy, civil society groups, and Japanese influences
174
6.6     Implications
175
7       Globalization and the dual welfare state: case study of Brazil
177
7.1     Brazil’s weak dual welfare state
178
7.1.1   Decommodification policies
180
7.1.2   Commodification policies
183
7.2     Race to the bottom
185
7.2.1   Social security
185
7.2.2   Labor market protections
188
7.2.3   Health care
189
7.2.4   Education
190
7.2.5   Summary
191
7.3     Institutional change
191
7.3.1   Welfare regime change?
192
7.3.2   Mediating role of domestic institutions
198
7.4     Who really gets hurt?
204
7.4.1   Social security and labor market protections (and social assistance)
204
7.4.2   Health care
206
7.4.3   Education
208
7.4.4   Summary
209
7.5     Other factors: democracy and partisanship
209
7.6     Implications
210
8       Conclusions
212
8.1     The case studies in perspective: globalization, domestic institutions, and social policies
213
8.2     Questioning prevailing assumptions and future research
218
8.2.1   Rethinking the trade-off between states and markets in developing economies
218
8.2.2   Rethinking the political economies of developing countries
219
8.2.3   Rethinking the capital–labor dichotomy
221
8.2.4   Broader questions for future research
222
8.3     Prospects for the future?
222
Appendix ALDC social spending
224
Appendix BAssessing potential labor power
229
Appendix CAdditional tests for the RTB hypothesis
234
Appendix DVariables in the inequality model
238
Appendix ETechnical notes on Gini coefficients
239
Appendix FLDC Gini coefficient statistics
240
Appendix GRobustness check
242
Appendix HConditional impact of trade on inequality
244
Appendix IDescriptions and sources of variables
246
Appendix JCluster results minus outcome variables
247
Appendix KDendrogram for cluster analysis
248
Appendix LPoverty tables
249
Appendix MSocial expenditures on social security, health, and education in India (percent of GDP) based on national data
253
References
255
Index
286




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