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Trade, Poverty and Employment: The Social Consequences of Integration with China

  • Lucio Castro

    (Maxwell Stamp PLC)

  • Daniel Saslavsky

    (Inter American Development Bank)

This paper estimates the potential effects of a free trade agreement (FTA) between China and Mercosur on poverty, income distribution, welfare and employment. The case of Argentina, in particular, is investigated. To this end, partial equilibrium techniques are combined with micro econometric methodologies employing data from household surveys to examine the likely effects of an FTA with China on poverty and income distribution. We find that the FTA would result in a small reduction in poverty as well as an improvement in the income distribution. Highly disaggregated data at the industry level is used for the first time to estimate labor demand-output and wage elasticities in order to estimate the effects of an agreement with China on sectoral and aggregate employment rates. According to this, trade with the PRC did not have a significant effect on industrial employment, even in a period of swift trade liberalization like the nineties.

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Paper provided by EconWPA in its series International Trade with number 0512017.

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Length: 29 pages
Date of creation: 28 Dec 2005
Date of revision:
Handle: RePEc:wpa:wuwpit:0512017
Note: Type of Document - pdf; pages: 29
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  1. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S20-43, July.
  2. James Heckman & Carmen Pages, 2003. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Working Papers 10129, National Bureau of Economic Research, Inc.
  3. Nicita, Alessandro, 2004. "Who benefited from trade liberalization in Mexico? Measuring the effects on household welfare," Policy Research Working Paper Series 3265, The World Bank.
  4. J. Bradford Jensen & Andrew Bernard & Peter Schott, 2005. "Survival of the Best Fit: Exposure to Low-Wage Countries and the (Uneven) Growth of U.S. Manufacturing Plants," Working Papers 05-19, Center for Economic Studies, U.S. Census Bureau.
  5. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
  6. Haltiwanger, John & Kugler, Adriana & Kugler, Maurice & Micco, Alejandro & Pagés, Carmen, 2004. "Effects of tariffs and real exchange rates on job reallocation: evidence from Latin America," Discussion Paper Series In Economics And Econometrics 0410, Economics Division, School of Social Sciences, University of Southampton.
  7. Lori G. Kletzer, 2001. "Job Loss from Imports: Measuring the Costs," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 110.
  8. Feenstra, Robert C., 1989. "Symmetric pass-through of tariffs and exchange rates under imperfect competition: An empirical test," Journal of International Economics, Elsevier, vol. 27(1-2), pages 25-45, August.
  9. Pablo Acosta & Leonardo Gasparini, 2007. "Capital Accumulation, Trade Liberalization, and Rising Wage Inequality: The Case of Argentina," Economic Development and Cultural Change, University of Chicago Press, vol. 55, pages 793-812.
  10. Daniel S. Hamermesh, 2004. "Labor Demand in Latin America and the Caribbean. What Does It Tell Us?," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 553-562 National Bureau of Economic Research, Inc.
  11. Guido G. Porto, 2003. "Using survey data to assess the distributional effects of trade policy," Policy Research Working Paper Series 3137, The World Bank.
  12. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
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