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Trade reforms, farm productivity, and poverty in Bangladesh

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  • Klytchnikova, Irina
  • Diop, Ndiame
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    Abstract

    This paper analyzes the distributional impacts of trade reforms in rural areas of Bangladesh. The liberalization of trade in irrigation equipment and fertilizer markets during the early 1990s has led to structural changes in the agricultural sector and a significant increase in rice productivity. A resulting increase in output has been associated with a decline in producer and consumer rice prices of approximately 25 percent. Using a combination of ex-post and ex-ante approaches, the authors investigate the implications of the changes in rice productivity and prices for the welfare of households. They find that the net effects of increased rice productivity and lower rice prices have benefited the poor. Regardless of the particular category analyzed, the poorest households emerged as being particularly positively affected by reforms in the 1990s. This mainly reflects the fact that they are predominantly net rice buyers in both urban and rural markets. In contrast, large net sellers of rice, among the better-off households in the rural areas, were the main losers. Since net buyers in rural areas tend to be poorer than net sellers, trade liberalization has benefited the poor. Although the authors are not able to test empirically what has happened to the welfare level of agricultural wage earners, secondary evidence suggests that they have gained from trade liberalization.

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    Bibliographic Info

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3980.

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    Date of creation: 01 Aug 2006
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    Handle: RePEc:wbk:wbrwps:3980

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    Keywords: Rural Poverty Reduction; Economic Theory&Research; Markets and Market Access; Crops&Crop Management Systems;

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    1. Ravallion, Martin, 2004. "Pro-poor growth : A primer," Policy Research Working Paper Series 3242, The World Bank.
    2. Nicita, Alessandro, 2006. "Export led growth, pro-poor or not? Evidence from Madagascar's textile and apparel industry," Policy Research Working Paper Series 3841, The World Bank.
    3. World Bank, 2002. "Poverty in Bangladesh : Building on Progress," World Bank Other Operational Studies 15303, The World Bank.
    4. Edmonds, Eric V. & Pavcnik, Nina, 2006. "Trade liberalization and the allocation of labor between households and markets in a poor country," Journal of International Economics, Elsevier, Elsevier, vol. 69(2), pages 272-295, July.
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    7. Finan, Frederico & Sadoulet, Elisabeth & de Janvry, Alain, 2005. "Measuring the poverty reduction potential of land in rural Mexico," Journal of Development Economics, Elsevier, Elsevier, vol. 77(1), pages 27-51, June.
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    9. Minten, Bart & Barrett, Christopher B., 2008. "Agricultural Technology, Productivity, and Poverty in Madagascar," World Development, Elsevier, Elsevier, vol. 36(5), pages 797-822, May.
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    12. Benjamin, Dwayne & Deaton, Angus, 1993. "Household Welfare and the Pricing of Cocoa and Coffee in Cote d'Ivoire: Lessons from the Living Standards Surveys," World Bank Economic Review, World Bank Group, World Bank Group, vol. 7(3), pages 293-318, September.
    13. Dorosh, Paul A., 2001. "Trade Liberalization and National Food Security: Rice Trade between Bangladesh and India," World Development, Elsevier, Elsevier, vol. 29(4), pages 673-689, April.
    14. Porto, Guido G., 2005. "Estimating household responses to trade reforms : net consumers and net producers in rural Mexico," Policy Research Working Paper Series 3695, The World Bank.
    15. Seshan, Ganesh, 2005. "The impact of trade liberalization on household welfare in vietnam," Policy Research Working Paper Series 3541, The World Bank.
    16. Deaton, Angus, 1989. "Rice Prices and Income Distribution in Thailand: A Non-parametric Analysis," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 99(395), pages 1-37, Supplemen.
    17. Ravallion, Martin & Lokshin, Michael, 2004. "Gainers and losers from trade reform in Morocco," Policy Research Working Paper Series 3368, The World Bank.
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