Globalization And The Human Development Trap

The feeble results of liberalization policies in Latin America are explained in terms of a multiple steady state model including a dynamic human development trap, endogenous technological change, technology transfer and trade. Divergent and convergent steady states, with and without a human development trap, exist under both autarchy and free trade. The model explains why import substitution is inferior to export promotion. While globalization is a necessary condition for convergence to development, it is not sufficient. Both trade and foreign direct investment create innovation assymetries hindering lagging countries that need to be balanced with export promotion and technological transfer for their successful integration with the global economy.