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The Effects of the Colombian Trade Liberalization on Urban Poverty

In: Globalization and Poverty

  • Pinelopi Koujianou Goldberg
  • Nina Pavcnik

We examine whether the Colombian trade reform can explain any of Colombia's decline in urban poverty between 1984 and 1995. Our approach focuses on short- and medium- run channels through which trade reform could affect poverty. Despite the chronological coincidence of the poverty reduction with the trade reforms over this period, we do not observe any evidence of a link between poverty and tariff reductions operating through the labor income channel. Our descriptive analysis suggests that although poverty is predominately concentrated among individuals living in households with unemployed head, it is non-negligible among the employed and especially those working in the informal sector and those paid below minimum wage. Industry affiliation also plays a role. However, we find no evidence that the trade reforms reduced poverty via any of the above variables in a significant way. We cannot rule out the possibility that trade liberalization has contributed to the poverty reduction through general equilibrium effects, and in particular through its potential role in lowering the prices of goods consumed primarily by the poor.

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This chapter was published in:
  • Ann Harrison, 2007. "Globalization and Poverty," NBER Books, National Bureau of Economic Research, Inc, number harr06-1, Abril.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 0106.
    Handle: RePEc:nbr:nberch:0106
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Maloney, William F. & Nunez, Jairo & Cunningham, Wendy & Fiess, Norbert & Montenegro, Claudio & Murrugarra, Edmundo & Santamaria,Mauricio & Sepulveda, Claudia, 2001. "Measuring the impact of minimum wages : evidence from Latin America," Policy Research Working Paper Series 2597, The World Bank.
    2. Orazio Attanasio & Pinelopi Goldberg & Nina Pavcnik, 2003. "Trade Reforms and Wage Inequiality in Colombia," NBER Working Papers 9830, National Bureau of Economic Research, Inc.
    3. Shaohua Chen & Ravallion, Martin, 2000. "How did the world's poorest fare in the 1990s ?," Policy Research Working Paper Series 2409, The World Bank.
    4. Juan Carlos Hallak & James Levinsohn, 2004. "Fooling Ourselves: Evaluating the Globalization and Growth Debate," Working Papers 509, Research Seminar in International Economics, University of Michigan.
    5. Angus Deaton & Christina Paxson, 1997. "Poverty Among Children And The Elderly In Developing Countries," Working Papers 992, Princeton University, Woodrow Wilson School of Public and International Affairs, Center for Research on Child Wellbeing..
    6. Pinelopi K. Goldberg & Nina Pavcnik, 2003. "The Response of the Informal Sector to Trade Liberalization," NBER Working Papers 9443, National Bureau of Economic Research, Inc.
    7. Adriana Kugler, 1999. "The Impact of Firing Costs on Turnover and Unemployment: Evidence from the Colombian Labour Market Reform," International Tax and Public Finance, Springer, vol. 6(3), pages 389-410, August.
    8. Feenstra, R.C. & Hanson, G.H., 1995. "Foreign Investment, Outsourcing and Relative Wages," Papers 95-14, California Davis - Institute of Governmental Affairs.
    9. Feenstra, Robert C. & Hanson, Gordon H., 1997. "Foreign direct investment and relative wages: Evidence from Mexico's maquiladoras," Journal of International Economics, Elsevier, vol. 42(3-4), pages 371-393, May.
    10. Pinelopi K. Goldberg & Nina Pavcnik, 2001. "Trade Protection and Wages: Evidence from the Colombian Trade Reforms," NBER Working Papers 8575, National Bureau of Economic Research, Inc.
    11. 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.
    12. Ravallion, Martin, 2004. "Competing concepts of inequality in the globalization debate," Policy Research Working Paper Series 3243, The World Bank.
    13. Pinelopi K. Goldberg & Nina Pavcnik, 2004. "Trade, Inequality, and Poverty: What Do We Know? Evidence from Recent Trade Liberalization Episodes in Developing Countries," NBER Working Papers 10593, National Bureau of Economic Research, Inc.
    14. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
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