Estimating The Povery Impacts Of Trade Liberalization

As a new round of World Trade Organization negotiations is being launched with greater emphasis on developing country participation, a body of literature is emerging which quantifies how international trade affects the poor in developing countries. In this survey of the literature, the author summarizes and classifies 35 trade and poverty studies into four methodological categories; cross-country regression, partial-equilibrium and cost-of-living analysis, general-equilibrium simulation, and micro-macro synthesis. These categories include a broad range of methodologies in current use. The continuum of approaches is bounded on one end by econometric analysis of household expenditure data, which is the traditional domain of poverty specialists, and sometimes labeled the "bottoms-up" approach. On the other end of the continuum are computable general equilibrium models based on national accounts data, or what might be called the "top-down" approach. Another feature of several recent trade and poverty studies--and one of the primary conclusions to emerge from the October 2000 "Conference on Poverty and the International Economy," sponsored by Globkom and the World Bank--is the recognition that factor markets are perhaps the most important link between trade and poverty, since households tend to be much more specialized in income than they are in consumption. Meanwhile, survet data on the income sources of developing country households has become increasingly available. As a result, this survey gives particular emphasis to the means by which studies address factor market links between trade and poverty. The general conclusion of the author's survey is that any analysis of trade and poverty needs to be informed by both the bottom-up and top-down perspectives. Indeed, recent "two-step" micro-macro studies sequentially link these two types of frameworks, such that general equilibrium mechanisms are incorporated along with detailed household survey information. Another methodology in a similar spirit and also increasingly used involves incorporating large numbers of surveyed households into a general-equilibrium simulation model. Although most of these studies have so far been limited to a single region, these approaches can be readily adapted for multi-region modeling so that trade and poverty comparisons can be made across countries within a consistent framework.

"An important area of research in recent years involves assessing the microeconomic implications of macro-level policies--particularly those related to international trade. While a wide range of research methodologies are available for assessing the microeconomic incidence of micro-policies, as well as for assessing the effect of macro-level policies on markets and broad groups of households, there is a gap when it comes to eliciting the disaggregated household and firm level effects of trade policies. Recent research addresses this knowledge gap and the present survey offers an overview of this literature. The preponderance of the evidence from the studies encompassed by this survey points to the dominance of earnings-side effects over consumption-side effects of trade reform. This is problematic, since household surveys are notable for their underreporting of income. From the perspective of the poor, it is the market for unskilled labor that is most important. The poverty effects of trade policy often hinge crucially on how well the increased demand for labor in one part of the economy is transmitted to the rest of the economy by way of increased wages, increased employment, or both. Further econometric research aimed at discriminating between competing factor mobility hypotheses is urgently needed. This paper--a product of the Trade Team, Development Research Group--is part of a larger effort in the group to assess the poverty impacts of trade policies"--World Bank web site.

A Brookings Institution Press and Yale Center for the Study of Globalization and Sciences-Po, Paris publication This thoughtful volume assesses the likely impact of reformed trade policies on the poorest of the poor—those on the bottom economic rungs in developing nations. The focus on a spectrum of poor nations across different regions provides some helpful and hopeful guidelines regarding the likely impacts of a global trade reform, agreed upon under the auspices of the World Trade Organization, as well as the impact of such reforms on economic development. In order to facilitate lesson-drawing across different regions, each country study utilizes a similar methodology. They combine information on trade policy at the product level with income and consumption data at the household level, thus capturing effects both on the macro level and in individual households where development policies ideally should improve day-to-day life. This uniformity of research approach across the country studies allows for a deeper and more robust comparison of results.

Trade Liberalization and Poverty in India attempts to capture the current dialogue on trade liberalization and poverty, and provides an overview of the poverty impact of trade liberalization in India. The impact of trade liberalization on poverty at the s

Over the past two decades, the percentage of the world’s population living on less than a dollar a day has been cut in half. How much of that improvement is because of—or in spite of—globalization? While anti-globalization activists mount loud critiques and the media report breathlessly on globalization’s perils and promises, economists have largely remained silent, in part because of an entrenched institutional divide between those who study poverty and those who study trade and finance. Globalization and Poverty bridges that gap, bringing together experts on both international trade and poverty to provide a detailed view of the effects of globalization on the poor in developing nations, answering such questions as: Do lower import tariffs improve the lives of the poor? Has increased financial integration led to more or less poverty? How have the poor fared during various currency crises? Does food aid hurt or help the poor? Poverty, the contributors show here, has been used as a popular and convenient catchphrase by parties on both sides of the globalization debate to further their respective arguments. Globalization and Poverty provides the more nuanced understanding necessary to move that debate beyond the slogans.

Trade liberalization can create economic opportunities for poor people. But are these opportunities available to men and women equally? Do the gender disparities in access to education, health, credit, and other resources limit the gains from trade and the potential benefits to poor women? This volume introduces the gender dimension into empirical analyses of the links between trade and poverty, which can improve policy making. The collection of chapters in this book is close to an ideal macro-micro evaluation technique that explicitly assesses the importance of gender in determining the poverty effects of trade shocks. Part I, relying on ex ante simulation approaches, focuses on the macroeconomic links between trade and gender, where labor market structure and its functioning play a key role. Part II concentrates on micro models of households and attempts to identify the ex post effects of trade shocks on household income levels and consumption choices. It also addresses questions about possible changes in inequality within households due to improved economic opportunities for women. 'Gender Aspects of the Trade and Poverty Nexus' will be invaluable to policy makers, development practitioners and researchers, journalists, and students.

Agricultural trade liberalization has been resisted by many developing-country policymakers, including those in the Middle East and North Africa, for fear it could hurt domestic farmers and exacerbate poverty. The authors of Trade Liberalization and Poverty in the Middle East and North Africa argue, however, that this concern about liberalization might be misplaced. Drawing on case studies from Egypt, Morocco, Syria, and Tunisia, the study uses household survey data and computable general equilibrium models to simulate the effects of various liberalization scenarios on different types of households in these countries, especially poor households. The results indicate that agricultural trade barriers are not an effective means of protecting the poor and that the benefits from many forms of agricultural trade liberalization to the region's consumers outweigh the costs to producers. If complemented with other domestic programs-including agricultural research and extension, information services, disease control, and social safety nets-the reforms have the potential to reduce poverty in these nations. The study findings are a valuable resource for policymakers and development specialists evaluating the role trade liberalization can play in economic development and poverty reduction.

This book uses Alan Winters’ analytical framework to investigate the effects of trade liberalisation on economic growth and poverty in Vietnam. The country launched a programme of economic and trade reforms, known as Doi Moi, in the mid-1980s which placed the economy on a transitional path from central planning to a market economy. Since then Vietnam has attained a number of remarkable achievements in terms of economic growth and poverty reduction. Although some formidable problems (such as inequality and inflation) remain, it is apparent that trade liberalisation has been associated with a big reduction in poverty. The analysis in the book focuses on the microeconomic (household) level, and there is an emphasis on tracing the effects of trade liberalisation through the four separate channels identified by Winters. Such in-depth and micro-level analyses yield new insights that support important policy lessons and recommendations for Vietnam in particular and, more generally, for similar developing countries.

Free trade can help 500 million people escape poverty and inject.