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Does trade reduce poverty ? a view from Africa


  • Le Goff, Maelan
  • Singh, Raju Jan


Although trade liberalization is being actively promoted as a key component in development strategies, theoretically, the impact of trade openness on poverty reduction is ambiguous. A more liberalized trade regime is argued to change relative factor prices in favor of the more abundant factor. If poverty and relative low income stem from abundance of labor, greater trade openness should lead to higher labor prices and a decrease in poverty. However, should the re-allocation of factors be hampered, the expected benefits from freer trade may not materialize. The theoretical ambiguity on the effects of openness is reflected in the available empirical evidence. This paper examines how the effect of trade openness on poverty may depend on complementary reforms that help a country take advantage of international competition. Using a non-linear regression specification that interacts a proxy of trade openness with proxies of various country structural specificities and a panel of 30 African countries over the period 1981-2010, the analysis finds that trade openness tends to reduce poverty in countries where financial sectors are deep, education levels high and governance strong.

Suggested Citation

  • Le Goff, Maelan & Singh, Raju Jan, 2013. "Does trade reduce poverty ? a view from Africa," Policy Research Working Paper Series 6327, The World Bank.
  • Handle: RePEc:wbk:wbrwps:6327

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    References listed on IDEAS

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    Cited by:

    1. Ernesto M. Pernia & Janine Elora M. Lazatin, 2016. "Do Regions Gain from an Open Economy?," UP School of Economics Discussion Papers 201602, University of the Philippines School of Economics.
    2. Oh, Saera & Lee, Sang Hyeon, 2017. "Does trade contribute to poverty reduction? If it does, where the benefit goes to?," 2017 Annual Meeting, February 4-7, 2017, Mobile, Alabama 252849, Southern Agricultural Economics Association.
    3. Singh,Raju & Huang,Yifei, 2016. "Financial channels, property rights, and poverty : a Sub-Saharan African perspective," Policy Research Working Paper Series 7559, The World Bank.
    4. Lubinga, Moses H., 2016. "The role of agricultural trade and policy complementarities in poverty reduction in South Africa," NAMC Publications 253094, National Agricultural Marketing Council.

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    Achieving Shared Growth; Free Trade; Economic Theory&Research; Trade Policy; Emerging Markets;

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