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

Author

Listed:
  • Lucio Castro

    (Maxwell Stamp PLC)

  • Daniel Saslavsky

    (Inter American Development Bank)

Abstract

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.

Suggested Citation

  • Lucio Castro & Daniel Saslavsky, 2005. "Trade, Poverty and Employment: The Social Consequences of Integration with China," International Trade 0512017, EconWPA.
  • Handle: RePEc:wpa:wuwpit:0512017
    Note: Type of Document - pdf; pages: 29
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    References listed on IDEAS

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    1. James J. Heckman & Carmen Pagés, 2004. "Law and Employment: Lessons from Latin America and the Caribbean," NBER Books, National Bureau of Economic Research, Inc, number heck04-1.
    2. 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.
    3. Bernard, Andrew B. & Jensen, J. Bradford & Schott, Peter K., 2006. "Survival of the best fit: Exposure to low-wage countries and the (uneven) growth of U.S. manufacturing plants," Journal of International Economics, Elsevier, vol. 68(1), pages 219-237, January.
    4. Porto, Guido G., 2003. "Trade reforms, market access, and poverty in Argentina," Policy Research Working Paper Series 3135, The World Bank.
    5. 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 20-43, July.
    6. Ravallion, M., 1992. "Poverty Comparisons - A Guide to Concepts and Methods," Papers 88, World Bank - Living Standards Measurement.
    7. 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.
    8. Altimir, Oscar & Beccaría, Luis Alberto, 1999. "El mercado de trabajo bajo el nuevo régimen económico en Argentina," Series Históricas 28, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    More about this item

    Keywords

    China; Import Competition; Trade and Labor Market Interactions; Employment; Income Distribution; Poverty;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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