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The impact of trade liberalization on household welfare in vietnam

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  • Seshan, Ganesh

Abstract

What is the effect of trade liberalization on households in developing countries? To what extent do the poor benefit when local markets are made more accommodative to international trade? The author empirically analyzes the distributional impact of trade policies on households in a low-income country with a large rural economy where labor markets are imperfect. The methodology in this paper, which can be applied to various types of labor market conditions, relates changes in prices attributed to trade reforms to changes in household welfare, income distribution, and poverty using theoretically consistent measures of producer and consumer welfare. The author investigates the effects on poverty and income distribution of national and international market integration in Vietnam's rice sectorand fertilizer market between 1993 and 1998, a period of ongoing market reforms when the national poverty rate fell sharply from 59 percent to 37 percent. He finds that when the effects of opening the rice and fertilizer market are isolated, Vietnam's agricultural trade reforms did not contribute to a significant improvement in overall household welfare or decline in poverty over this period. Nonetheless, the liberalization exercise can explain about half of the reduction in poverty incidence among farm households. The results also show that liberalization did not exacerbate income inequality, but did generate gains for rural households across the distribution, particularly the poor, at the expense of urban households.

Suggested Citation

  • Seshan, Ganesh, 2005. "The impact of trade liberalization on household welfare in vietnam," Policy Research Working Paper Series 3541, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3541
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Bakhshoodeh, M., 2010. "Impacts of world prices transmission to domestic rice markets in rural Iran," Food Policy, Elsevier, vol. 35(1), pages 12-19, February.
    2. Klytchnikova, Irina & Diop, Ndiame, 2006. "Trade reforms, farm productivity, and poverty in Bangladesh," Policy Research Working Paper Series 3980, The World Bank.
    3. Muriithi, Beatrice W. & Matz, Julia Anna, 2015. "Welfare effects of vegetable commercialization: Evidence from smallholder producers in Kenya," Food Policy, Elsevier, vol. 50(C), pages 80-91.
    4. Jones, Nicola & Nguyen, Ngoc Anh & Nguyen, Thu Hang, 2007. "Trade liberalisation and intra-household poverty in Vietnam: a q2 social impact analysis," MPRA Paper 4206, University Library of Munich, Germany.
    5. Cuong Viet Nguyen, 2009. "Does production of traded agricultural products help poverty reduction? evidence from Vietnam," Economics Bulletin, AccessEcon, vol. 29(2), pages 726-735.
    6. Mohammad Bakhshoodeh, 2008. "Impacts of World Prices Transmission to Domestic Markets and Welfare of Marginal Households: An Empirical Application to Rice in Iran," Working Papers 399, Economic Research Forum, revised 03 Jan 2008.
    7. Vincent Leyaro & Oliver Morrissey & Trudy Owens, "undated". "Food Price Changes and Consumer Welfare in Tanzania 1991 – 2007," Discussion Papers 10/01, University of Nottingham, CREDIT.
    8. Nguyen, Anh & Jones, Nicola, 2006. "Vietnam’s Trade Liberalisation: Potential Impacts on Child Well-being," MPRA Paper 1385, University Library of Munich, Germany.
    9. Viet Cuong, Nguyen, 2010. "Does Agriculture Help Poverty and Inequality Reduction? Evidence from Vietnam," Agricultural Economics Review, Greek Association of Agricultural Economists, vol. 11(1), January.

    More about this item

    Keywords

    Access to Markets; Crops&Crop Management Systems; Environmental Economics&Policies; Economic Theory&Research; Markets and Market Access;

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