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Distributive Effects of Regional Trade Agreements on the ‘Small Trading Partners’: Mercosur and the Case of Uruguay and Paraguay

  • Fernando Borraz
  • M�ximo Rossi
  • Daniel Ferres

It is disputed whether trade liberalisation processes are sufficient for reducing poverty and inequality. We explore how ‘gains from trade’ have been distributed in the two minor trade partners of Mercosur, Uruguay and Paraguay, by analysing the impact of trade liberalisation on poverty and inequality through two main transmission channels: prices and income. In the case of Uruguay, trade liberalisation favoured a reduction in poverty indicators but had an almost zero effect on income inequality. In the case of Paraguay, trade liberalisation had a markedly negative impact in terms of poverty yet income distribution improved. We conclude that in the case of Mercosur, the effect of trade on poverty and income inequality varies per country and per region. In particular, we conclude that trade integration policies cannot be regarded as ‘poverty-alleviating’ per se.

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Article provided by Taylor & Francis Journals in its journal The Journal of Development Studies.

Volume (Year): 48 (2012)
Issue (Month): 12 (December)
Pages: 1828-1843

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Handle: RePEc:taf:jdevst:v:48:y:2012:i:12:p:1828-1843
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  1. Pablo Sanguinetti & Iulia Traistaru & Christian Volpe Martincus, 2004. "Economic Integration and Location of Manufacturing Activities: Evidence from Mercosur," ERSA conference papers ersa04p609, European Regional Science Association.
  2. Porto, Guido G., 2006. "Using survey data to assess the distributional effects of trade policy," Journal of International Economics, Elsevier, vol. 70(1), pages 140-160, September.
  3. Borraz Fernando & Lopez-Cordova Jose Ernesto, 2007. "Has Globalization Deepened Income Inequality in Mexico?," Global Economy Journal, De Gruyter, vol. 7(1), pages 1-57, February.
  4. Marisa Bucheli & Máximo Rossi, 1994. "Distribución del ingreso en el Uruguay (1984-1992)," Documentos de Trabajo (working papers) 1094, Department of Economics - dECON.
  5. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
  6. Antoni Estevadeordal & Junichi Goto & Raul Saez, 2000. "The New Regionalism in the Americas: The Case of MERCOSUR," IDB Publications (Working Papers) 9378, Inter-American Development Bank.
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