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The Effects of the Colombian Trade Liberalization on Urban Poverty

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  • Pinelopi Koujianou Goldberg
  • Nina Pavcnik

Abstract

We examine whether the Colombian trade reform can explain any of Colombia's decline in urban poverty between 1984 and 1995. Our approach focuses on short- and medium- run channels through which trade reform could affect poverty. Despite the chronological coincidence of the poverty reduction with the trade reforms over this period, we do not observe any evidence of a link between poverty and tariff reductions operating through the labor income channel. Our descriptive analysis suggests that although poverty is predominately concentrated among individuals living in households with unemployed head, it is non-negligible among the employed and especially those working in the informal sector and those paid below minimum wage. Industry affiliation also plays a role. However, we find no evidence that the trade reforms reduced poverty via any of the above variables in a significant way. We cannot rule out the possibility that trade liberalization has contributed to the poverty reduction through general equilibrium effects, and in particular through its potential role in lowering the prices of goods consumed primarily by the poor.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11081.

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Date of creation: Jan 2005
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Publication status: published as Goldberg, Pinelope Koujianou and Nina Pavcnik. "Trade, Wages, And The Political Economy Of Trade Protection: Evidence From The Columbia Trade Reforms," Journal of International Economics, 2005, v66(1,May), 75-105.
Handle: RePEc:nbr:nberwo:11081

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  1. Adriana D. Kugler, 1999. "The impact of firing costs on turnover and unemployment: Evidence from the Colombian labour market reform," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 388, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Juan Carlos Hallak & James Levinsohn, 2004. "Fooling Ourselves: Evaluating the Globalization and Growth Debate," Working Papers, Research Seminar in International Economics, University of Michigan 509, Research Seminar in International Economics, University of Michigan.
  3. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, Elsevier, vol. 74(2), pages 331-366, August.
  4. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Department of Economics, California Davis - Department of Economics 95-14, California Davis - Department of Economics.
  5. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, Elsevier, vol. 42(3-4), pages 371-393, May.
  6. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(1), pages 72-115, March.
  7. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "The Response of the Informal Sector to Trade Liberalization," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3874, C.E.P.R. Discussion Papers.
  8. Ravallion, Martin, 2004. "Competing concepts of inequality in the globalization debate," Policy Research Working Paper Series, The World Bank 3243, The World Bank.
  9. Angus Deaton & Christina Paxson, 1997. "Poverty Among Children And The Elderly In Developing Countries," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing. 992, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
  10. Guido G. Porto, 2003. "Using survey data to assess the distributional effects of trade policy," Policy Research Working Paper Series, The World Bank 3137, The World Bank.
  11. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
  12. William Maloney & Jairo Mendez, 2004. "Measuring the Impact of Minimum Wages. Evidence from Latin America," NBER Chapters, National Bureau of Economic Research, Inc, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 109-130 National Bureau of Economic Research, Inc.
  13. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
  14. Shaohua Chen & Ravallion, Martin, 2000. "How did the world's poorest fare in the 1990s ?," Policy Research Working Paper Series, The World Bank 2409, The World Bank.
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Cited by:
  1. Marjit, Sugata & Kar, Saibal & Chaudhuri, Sarbajit, 2011. "Recession in the skilled sector and implications for informal wage," Research in Economics, Elsevier, Elsevier, vol. 65(3), pages 158-163, September.
  2. Brian McCaig, 2009. "Exporting Out of Poverty: Provincial Poverty in Vietnam and U.S. Market Access," ANU Working Papers in Economics and Econometrics, Australian National University, College of Business and Economics, School of Economics 2009-502, Australian National University, College of Business and Economics, School of Economics.
  3. Eduardo Lora & Deisy Johanna Fajardo, 2012. "Employment and Taxes in Latin America: An Empirical Study of the Effects of Payroll, Corporate Income and Value-Added Taxes on Labor Outcomes," Research Department Publications, Inter-American Development Bank, Research Department 4791, Inter-American Development Bank, Research Department.
  4. Cagé, Julia, 2009. "Growth, Poverty Reduction and Governance in Developing Countries: a Survey," CEPREMAP Working Papers (Docweb), CEPREMAP 0904, CEPREMAP.
  5. repec:idb:brikps:72378 is not listed on IDEAS
  6. Ural Marchand, Beyza, 2011. "Tariff Pass-Through and the Distributional Effects of Trade Liberalization," Working Papers, University of Alberta, Department of Economics 2011-22, University of Alberta, Department of Economics.

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