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When Does Trade Hurt? Market, Transition and Developing Economies

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Author Info
Kala Krishna
Cemile Yavas

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Abstract

This paper argues that labor market distortions in transition and developing economies help explain differential impacts of trade liberalization. We assume that workers differ in ability. In a market economy their earnings depend on their ability. However, earnings are independent of ability due to a common wage set in manufacturing in a transition economy and because of family farms in a developing economy. Our work suggests that trade liberalization without structural reform can have serious adverse effects in transition and developing economies: there can even be mutual losses from trade.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8995.

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Date of creation: Jun 2002
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Handle: RePEc:nbr:nberwo:8995

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Find related papers by JEL classification:
F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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References listed on IDEAS
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.:
  1. Roland, G. & Verdier, T., 1997. "Transition and the Output Fall," DELTA Working Papers 97-09, DELTA (Ecole normale supérieure).
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  2. Kala Krishna & Cemile Yavas, 2001. "Lumpy Consumer Durables, Market Power, and Endogenous Business Cycles," NBER Working Papers 8296, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Ng Yew Kwang, 1965. "Why do People Buy Lottery Tickets? Choices Involving Risk and the Indivisibility of Expenditure," Journal of Political Economy, University of Chicago Press, vol. 73, pages 530. [Downloadable!] (restricted)
  4. Kala Krishna & Cemile Yavas, . "Wage Equality in a General Equilibrium Model with Indivisibilities," EPRU Working Paper Series 01-12, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  5. Davis, Donald R, 1998. "Does European Unemployment Prop Up American Wages? National Labor Markets and Global Trade," American Economic Review, American Economic Association, vol. 88(3), pages 478-94, June. [Downloadable!] (restricted)
  6. Blanchard, O & Kremer, M, 1996. "Disorganization," Working papers 96-30, Massachusetts Institute of Technology (MIT), Department of Economics.
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  1. Anderson, Kym & Huang, Jikun & Ianchovichina, Elena, 2003. "Long-run impacts of China's WTO accession on farm-nonfarm income inequality and rural poverty," Policy Research Working Paper Series 3052, The World Bank. [Downloadable!]
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