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Trade Liberalization and Poverty: What Have We Learned in a Decade?

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  • L. Alan Winters

    (Department of Economics, University of Sussex, Brighton BN1 9SL, United Kingdom
    Centre for Economic Policy Research, London EC1V 3PZ, United Kingdom
    Institute for the Study of Labor, 53113 Bonn, Germany
    Global Development Network, New Delhi 110070, India)

  • Antonio Martuscelli

    (Department of Economics, University of Sussex, Brighton BN1 9SL, United Kingdom)

Abstract

This article reviews key recent literature on the effects of trade liberalization on poverty in developing countries and asks whether our knowledge has changed significantly over a decade. The conclusion that liberalization generally boosts income and thus reduces poverty has not changed; some authors suggest that this finding is not true for very poor countries, but this suggestion is far from proven at present. With regard to microeconomics, recent literature again confirms that liberalization has very heterogeneous effects on poor households, depending, inter alia, on what trade policies are liberalized and how the household earns its living. Working in the export sector predicts gains, and working in the import-competing sector predicts losses, a finding that is reinforced by studies of the effects of liberalization on wages. New research has suggested several ways in which intrasectoral wage inequality is increased by trade, but this research generally does not indicate that the poor actually lose. A fairly common finding is that female workers gain from trade liberalization.

Suggested Citation

  • L. Alan Winters & Antonio Martuscelli, 2014. "Trade Liberalization and Poverty: What Have We Learned in a Decade?," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 493-512, October.
  • Handle: RePEc:anr:reseco:v:6:y:2014:p:493-512
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    More about this item

    Keywords

    developing countries; inequality; globalization; economic growth; tariffs;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

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