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Trade, Poverty and the Lagging Regions of South Asia


  • Pravin Krishna
  • Devashish Mitra
  • Asha Sundaram


This chapter studies the differential effects that trade openness may have on leading and lagging regions within a country. Examining data from India, we find that while trade liberalization is associated with reduced poverty, this effect is smaller in lagging states. The expected transmission of international prices to domestic prices with openness to trade is seen to be less perfect in lagging states than in leading ones, especially in the rural sector. This suggests that poverty reduction in lagging regions is impeded by the lack of exposure to international markets as opposed to another commonly argued factor - the competition to domestic production from international trade. Cross-country analysis with a sample of countries in South Asia (Bangladesh, India, Nepal, Pakistan and Sri Lanka) also suggests that countries with a smaller proportion of their populations in lagging regions experience greater reduction in poverty rates following trade liberalization. Our study confirms that though trade liberalization can bring gains, there is scope for policy to ensure that these gains are distributed more equally across sub-national regions. Our results highlight the importance of developing infrastructure including equipped ports, better and more extensive roads and communication links in exploiting gains from international trade.

Suggested Citation

  • Pravin Krishna & Devashish Mitra & Asha Sundaram, 2010. "Trade, Poverty and the Lagging Regions of South Asia," NBER Working Papers 16322, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:16322
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    Cited by:

    1. 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.
    2. Amit Batabyal & Peter Nijkamp, 2014. "Technology, Learning, and Long Run Economic Growth in Leading and Lagging Regions," ERSA conference papers ersa14p893, European Regional Science Association.
    3. Budy P Resosudarmo & Acram Latiph & Saran Sarntisart & Isra Sarntisart, 2016. "Development in Southeast Asia's lagging regions," Departmental Working Papers 2016-08, The Australian National University, Arndt-Corden Department of Economics.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes


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