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The price effect of tariff liberalization: Measuring the impact on household welfare

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  • Nicita, Alessandro

Abstract

Trade policy literature has for many years emphasized open policies positive impact on economic growth and development. While these results generally hold when measured on averages, empirical evidence suggests that trade liberalization is unlikely to produce beneficial results across all households. This study adds to the literature by providing an analysis of the distributive effects of tariff liberalization in Mexico. The paper examines the effect of tariff liberalization from the perspective of households both as consumers and factor owners allowing for imperfect domestic price transmission. The results indicate the overall positive effect of tariff liberalization masks significant differences in the distribution of gains both across income levels and across geographic regions. Richer households are found to have gained relatively more. Urban areas, as well as Mexican states closest to the United States border, are also found to be larger beneficiaries while southernmost states have been largely bypassed by the effects of tariff liberalization. Those results can be explained not only in relation to the different endowments of the households, but also by the diverse effects on local prices that has resulted from Mexican trade liberalization.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 89 (2009)
Issue (Month): 1 (May)
Pages: 19-27

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Handle: RePEc:eee:deveco:v:89:y:2009:i:1:p:19-27

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Web page: http://www.elsevier.com/locate/devec

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Keywords: Household welfare Mexico Pass-through Trade and poverty;

References

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  1. Thomas W. Hertel & Jeffrey J. Reimer, 2006. "Predicting the Poverty Impacts of Trade Reform," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
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Citations

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Cited by:
  1. Garduno-Rivera, Rafael & Baylis, Katherine R., 2012. "Effect of Tariff Liberalization on Mexico’s Income Distribution in the presence of Migration," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124740, Agricultural and Applied Economics Association.
  2. Chakravorty, Ujjayant & Hubert, Marie-Helene & Ural Marchand, Beyza, 2012. "Food for Fuel: The Effect of U.S. Energy Policy on Indian Poverty," Working Papers 2012-17, University of Alberta, Department of Economics.
  3. Jorge Balat & Irene Brambilla & Guido Porto, 2007. "Realizing the Gains From Trade: Export Crops, Marketing Costs, and Poverty," NBER Working Papers 13395, National Bureau of Economic Research, Inc.
  4. Garduno-Rivera, Rafael, 2010. "Effect of NAFTA on Mexico's Income Distribution in the Presence of Migration," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61895, Agricultural and Applied Economics Association.
  5. Paolo Giordano & Kun Li, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications 79119, Inter-American Development Bank.
  6. Massimiliano Calì, 2012. "Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts," SERC Discussion Papers 0114, Spatial Economics Research Centre, LSE.
  7. Baylis, Katherine R. & Garduno-Rivera, Rafael & Piras, Gianfranco, 2009. "The distributional effects of NAFTA in Mexico: evidence from a panel of municipalities," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49463, Agricultural and Applied Economics Association.
  8. Elizabeth Jane Casabianca, 2012. "Distributional effects of preferential and multilateral trade liberalization: the case of Paraguay," FIW Working Paper series 083, FIW.
  9. Porto, Guido G., 2005. "Estimating household responses to trade reforms : net consumers and net producers in rural Mexico," Policy Research Working Paper Series 3695, The World Bank.
  10. Ural Marchand, Beyza, 2011. "Tariff Pass-Through and the Distributional Effects of Trade Liberalization," Working Papers 2011-22, University of Alberta, Department of Economics.
  11. Robert A. Blecker, 2012. "Stolper–Samuelson Revisited: Trade And Distribution With Oligopolistic Profits," Metroeconomica, Wiley Blackwell, vol. 63(3), pages 569-598, 07.
  12. Nicita, Alessandro & Olarreaga, Marcelo & Porto, Guido, 2014. "Pro-poor trade policy in Sub-Saharan Africa," Journal of International Economics, Elsevier, vol. 92(2), pages 252-265.
  13. Fernando Borraz & Daniel Ferrés & Máximo Rossi, 2013. "Assessment of the distributive impact of national trade reforms in Brazil," Journal of Economic Inequality, Springer, vol. 11(2), pages 215-235, June.
  14. Han, Jun & Liu, Runjuan & Ural Marchand, Beyza & Zhang, Junsen, 2013. "Market Structure, Imperfect Tariff Pass-Through, and Household Welfare in Urban China," Working Papers 2013-11, University of Alberta, Department of Economics, revised 01 Jul 2014.

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