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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

Related research

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

References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Jose Manuel Campa & Linda S. Goldberg, 2002. "Exchange Rate Pass-Through into Import Prices: A Macro or Micro Phenomenon?," NBER Working Papers 8934, National Bureau of Economic Research, Inc.
  2. Pinelopi K. Goldberg & Michael M. Knetter, 1996. "Goods Prices and Exchange Rates: What Have We Learned?," NBER Working Papers 5862, National Bureau of Economic Research, Inc.
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  13. 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.
  14. Robertson, Raymond, 2004. "Relative prices and wage inequality: evidence from Mexico," Journal of International Economics, Elsevier, vol. 64(2), pages 387-409, December.
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  17. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  18. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
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Citations

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Cited by:
  1. 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.
  2. 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.
  3. Paolo Giordano & Kun Li, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications 79119, Inter-American Development Bank.
  4. 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.
  5. Elizabeth Jane Casabianca, 2012. "Distributional effects of preferential and multilateral trade liberalization: the case of Paraguay," FIW Working Paper series 083, FIW.
  6. Balat, Jorge & Brambilla, Irene & Porto, Guido, 2009. "Realizing the gains from trade: Export crops, marketing costs, and poverty," Journal of International Economics, Elsevier, vol. 78(1), pages 21-31, June.
  7. 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.
  8. Ural Marchand, Beyza, 2012. "Tariff pass-through and the distributional effects of trade liberalization," Journal of Development Economics, Elsevier, vol. 99(2), pages 265-281.
  9. 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.
  10. 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.
  11. Massimiliano Calì, 2012. "Trade Liberalisation Does Not Always Raise Wage Premia: Evidence from Ugandan Districts," SERC Discussion Papers 0114, Spatial Economics Research Centre, LSE.
  12. 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.
  13. 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.
  14. Robert A. Blecker, 2012. "Stolper–Samuelson Revisited: Trade And Distribution With Oligopolistic Profits," Metroeconomica, Wiley Blackwell, vol. 63(3), pages 569-598, 07.

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