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Tariff Pass-Through and the Distributional Effects of Trade Liberalization

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  • Ural Marchand, Beyza

    ()
    (University of Alberta, Department of Economics)

Abstract

This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradeable 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

Paper provided by University of Alberta, Department of Economics in its series Working Papers with number 2011-22.

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Length: 43 pages
Date of creation: 01 Dec 2011
Date of revision:
Handle: RePEc:ris:albaec:2011_022

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Keywords: trade liberalization; pass-through; wages; India; welfare distribution;

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References

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  1. Ann Harrison, 2006. "Globalization and Poverty," NBER Working Papers 12347, National Bureau of Economic Research, Inc.
  2. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3877, C.E.P.R. Discussion Papers.
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  4. Pinelopi Koujianou Goldberg & Nina Pavcnik, 2007. "The Effects of the Colombian Trade Liberalization on Urban Poverty," NBER Chapters, National Bureau of Economic Research, Inc, in: Globalization and Poverty, pages 241-290 National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Alessandro Nicita & Marcelo Olarreaga & Guido Porto, 2012. "Pro-Poor Trade Policy in Sub-Saharan Africa," CEDLAS, Working Papers, CEDLAS, Universidad Nacional de La Plata 0134, CEDLAS, Universidad Nacional de La Plata.
  2. Ahsan, Reshad N., 2013. "Input tariffs, speed of contract enforcement, and the productivity of firms in India," Journal of International Economics, Elsevier, Elsevier, vol. 90(1), pages 181-192.
  3. Ujjayant Chakravorty & Martino Pelli & Beyza Ural Marchand, 2013. "Does the Quality of Electricity Matter? Evidence from Rural India," CESifo Working Paper Series 4457, CESifo Group Munich.
  4. 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, revised 01 Jul 2014.

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