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Factor Immobility and Regional Impacts of Trade Liberalization Evidenceon Poverty From India

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  • Petia Topalova

Abstract

This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile, at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/218.

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Length: 46
Date of creation: 01 Sep 2010
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Handle: RePEc:imf:imfwpa:10/218

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Keywords: Poverty; Fiscal reforms; Income distribution; Private consumption; Protectionism; Trade policy; trade liberalization; tariff cuts; trade protection; trade reforms; tariff reductions; impact of trade; trade reform; international trade; tariff changes; trade opening; tariff barriers; political economy; effects of trade liberalization; tariff reduction; impact of trade liberalization; unskilled labor; measure of trade; impact of trade reforms; skilled workers; export growth; foreign trade; non-tariff barriers; trade model; average tariff; domestic prices; quantitative restrictions; domestic investment; trade restrictions; trade flows; tariff protection; trade models; trade theory; open economy; tariff rate; domestic producers; tariff cut; tariff levels; trade openness; tariff reform; tariff rates; trade regime; standard trade theory; factor price; wholesale price; free trade agreement; wage differentials; trade theories; free movement of factors; tariff barrier; nontariff barriers; free trade; trade classification; import competition; importable goods; trade liberalization increases; skilled labor; poverty consequences; imperfect competition; factor markets; intermediate goods; exchange rate regime; changes in trade; freer trade; oil prices; trading partners; export goods; zero tariff; wholesale price index; trade flow; factor price equalization; trade shocks; trade agreement; import substitution; rates of protection; trade effects;

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