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The Poverty Impacts of Global Commodity Trade Liberalization

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  • Hertel, Thomas W.
  • Keeney, Roman

Abstract

This paper examines the poverty impacts of global merchandise trade reform by looking at a wide range of developing countries in Africa, Asia and Latin America. Overall, we find that trade reform tends to reduce poverty primarily through the inclusion of agricultural components. The majority of our developing country sample experiences small poverty increases from non-agricultural reforms. We explore the relative poverty-friendliness of agricultural trade reforms in detail, examining the differential impacts on real after-tax factor returns of agricultural versus non-agricultural reforms. This analysis is extended to the distribution of households by looking at stratum-specific poverty changes. Our findings indicate that the more favorable impacts of agricultural reforms are driven by increased returns to peasant farm households’ labor as well as higher returns for unskilled wage labor. Finally, we examine the commodity-specific poverty impacts of trade reform for this sample of countries. We find that liberalization of food grains and other processed foods represent the largest contributions to poverty reduction. More specifically, it is tariff reform in these commodity markets that dominates the poverty increasing impacts of wealthy country subsidy removal.

Suggested Citation

  • Hertel, Thomas W. & Keeney, Roman, 2009. "The Poverty Impacts of Global Commodity Trade Liberalization," Agricultural Distortions Working Paper 52786, World Bank.
  • Handle: RePEc:ags:wbadwp:52786
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    File URL: http://purl.umn.edu/52786
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    References listed on IDEAS

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    1. Thomas W. Hertel & Roman Keeney & Maros Ivanic & L. Alan Winters, 2015. "Why Isn't the Doha Development Agenda more Poverty Friendly?," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 18, pages 375-391 World Scientific Publishing Co. Pte. Ltd..
    2. Joseph Francois & Hans Van Meijl & Frank Van Tongeren, 2005. "Trade liberalization in the Doha Development Round," Economic Policy, CEPR;CES;MSH, vol. 20(42), pages 349-391, April.
    3. W. Jill Harrison & J. Mark Horridge & K.R. Pearson, 2000. "Decomposing Simulation Results with Respect to Exogenous Shocks," Computational Economics, Springer;Society for Computational Economics, vol. 15(3), pages 227-249, June.
    4. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    5. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611.
    6. Thomas W. Hertel & Roman Keeney & Maros Ivanic & L. Alan Winters, 2007. "Distributional effects of WTO agricultural reforms in rich and poor countries," Economic Policy, CEPR;CES;MSH, vol. 22, pages 289-337, April.
    7. Golub, Alla & W. Hertel, Thomas, 2008. "Global Economic Integration and Land Use Change," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 463-488.
    8. Kym Anderson & William A. Masters, 2009. "Distortions to Agricultural Incentives in Africa," World Bank Publications, The World Bank, number 2607.
    9. Anderson, Kym & Martin, Will & van der Mensbrugghe, Dominique, 2005. "Global impacts of Doha trade reform scenarios on poverty," Policy Research Working Paper Series 3735, The World Bank.
    10. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2002. "Estimating consumer demands across the development spectrum: maximum likelihood estimates of an implicit direct additivity model," Journal of Development Economics, Elsevier, vol. 68(2), pages 289-307, August.
    11. de Janvry, Alain & Fafchamps, Marcel & Sadoulet, Elisabeth, 1991. "Peasant Household Behaviour with Missing Markets: Some Paradoxes Explained," Economic Journal, Royal Economic Society, vol. 101(409), pages 1400-1417, November.
    12. Valenzuela, Ernesto & Kym Anderson, 2009. "Alternative Agricultural Price Distortions for CGE Analysis of Developing Countries, 2004 and 1980-84," GTAP Research Memoranda 2925, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    13. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
    14. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685.
    15. Thomas W. Hertel & Maros Ivanic & Paul V. Preckel & John A. L. Cranfield, 2004. "The Earnings Effects of Multilateral Trade Liberalization: Implications for Poverty," World Bank Economic Review, World Bank Group, vol. 18(2), pages 205-236.
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    Cited by:

    1. Douillet, Mathilde, 2012. "Trade policies and agricultural exports of Sub-Saharan African countries: Some stylized facts and perspectives," MPRA Paper 40962, University Library of Munich, Germany.

    More about this item

    Keywords

    Distorted incentives; agricultural and trade policy reforms; national agricultural development; Agricultural and Food Policy; International Relations/Trade; F13; F14; Q17; Q18;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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