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Tariff pass-through and the distributional effects of trade liberalization

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  • Ural Marchand, Beyza

Abstract

This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradable goods and wages. The cost of consumption for each household is affected by the domestic price changes, while wage incomes adjust to these price changes in equilibrium. Three rounds of the Indian Employment and Consumption Surveys are used for the analysis. The price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices. In order to assess the distributional effects, a series of nonparametric local linear regressions are estimated. The findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization, while the average effect was generally pro-poor and varied significantly across the per capita expenditure spectrum.

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Bibliographic Info

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

Volume (Year): 99 (2012)
Issue (Month): 2 ()
Pages: 265-281

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Handle: RePEc:eee:deveco:v:99:y:2012:i:2:p:265-281

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

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Keywords: Trade liberalization; Pass-through; Wages; India; Welfare distribution;

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References

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  8. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "The Effects of the Colombian Trade Liberalization on Urban Poverty," NBER Chapters, in: Globalization and Poverty, pages 241-290 National Bureau of Economic Research, Inc.
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  13. Rana Hasan & Devashish Mitra & K.V. Ramaswamy, 2007. "Trade Reforms, Labor Regulations, and Labor-Demand Elasticities: Empirical Evidence from India," The Review of Economics and Statistics, MIT Press, vol. 89(3), pages 466-481, August.
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  15. Petia Topalova, 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(4), pages 1-41, October.
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  17. Pravin Krishna & Devashish Mitra, . "Trade Liberalization, Market Discipline and Productivity Growth: New Evidence From India," Working Papers 96-8, Brown University, Department of Economics.
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Citations

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Cited by:
  1. Nicita, Alessandro & Olarreaga, Marcelo & Porto, Guido, 2011. "Pro-poor trade policy in Sub-Saharan Africa," CEPR Discussion Papers 8594, C.E.P.R. Discussion Papers.
  2. 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.
  3. Ahsan, Reshad N., 2013. "Input tariffs, speed of contract enforcement, and the productivity of firms in India," Journal of International Economics, Elsevier, vol. 90(1), pages 181-192.
  4. Ujjayant Chakravorty & Martino Pelli & Beyza Ural Marchand, 2014. "Does the Quality of Electricity Matter? Evidence from Rural India," Working Papers 2014.11, Fondazione Eni Enrico Mattei.

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