Globalization in the Food Sector and Poverty

Abstract This paper provides new evidence on the globalization‒poverty nexus by isolating the effects of the food sector on the prevalence of absolute poverty. Using panel regressions with fixed effects (FE) and Generalized Method of Moment (GMM) estimators for a panel of 12 Latin American countries from 1995 to 2020, we find that increased food trade significantly increases absolute poverty in our sample. Extended analysis suggests that this effect operates primarily through food exports. Using a recently collected indicator of globalization in the food sector, our estimates indicate that the opening of food markets since the mid-1990s may have accounted for approximately two additional percentage points of the population living below the absolute poverty line of $2.15 a day. Our results highlight that, despite its modest share of total trade, food sector globalization should be accompanied by policy measures aimed at mitigating potential poverty traps associated with structural transformations following increased food exports.