The Earnings Effects of Multilateral Trade Liberalization : Implications for Poverty

Most researchers examining poverty and multilateral trade liberalization have had to examine average, or per capita effects, suggesting that if per capita real income rises, poverty will fall. This inference can be misleading. Combining results fro...

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Bibliographic Details
Main Authors:	Hertel, Thomas W., Ivanic, Maros, Preckel, Paul V., Cranfield, John A.L.
Format:	Journal Article
Language:	English en_US
Published:	Washington, DC: World Bank 2014
Subjects:	AGRICULTURAL COMMODITIES AGRICULTURAL EXPORT SUBSIDIES AGRICULTURAL PRODUCTS AGRICULTURAL SUBSIDIES AGRICULTURAL TRADE AGRICULTURAL TRADE LIBERALIZATION AGRICULTURE APPAREL APPAREL EXPORTS APPAREL PRODUCTS AVERAGE TARIFF AVERAGE TARIFFS BARGAINING BENCHMARK BIDS BORROWING BUDGET CONSTRAINT CAPITAL GOODS CAPITAL INTENSITY CAPITAL RETURN CAPITAL SHARE CAPITAL STOCK CHILD LABOR COMMODITIES COMMODITIES PRODUCER COMMODITY COMMODITY PRICE COMMODITY PRICES CONSTANT SHARE CONSUMER DEMAND CONSUMER DEMANDS CONSUMER EXPENDITURE CONSUMER GOOD CONSUMER PREFERENCES CONSUMER PRICES CONSUMER SPENDING CONSUMERS DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPING ECONOMIES DEVELOPING ECONOMY DEVELOPMENT BANK DEVELOPMENT ECONOMICS DISTRIBUTION OF INCOME DURABLE DURABLE GOODS DURABLES ECONOMIC ANALYSIS ECONOMIC CRISIS ECONOMIC POLICY ELASTICITY ELASTICITY OF TRANSFORMATION EMPLOYMENT EXOGENOUS SHOCKS EXPENDITURE EXPENDITURES EXPORT TAXES EXPORTS FACTOR ENDOWMENTS FACTOR MARKETS FACTOR PRICE FACTORS OF PRODUCTION FAMILY LABOR FOOD PRICE FOOD PRICES GDP GDP PER CAPITA GENERAL EQUILIBRIUM GENERAL EQUILIBRIUM MODEL GENERAL EQUILIBRIUM MODELING GENERAL EQUILIBRIUM ¨ ANALYSIS GLOBAL ECONOMY GLOBAL TRADE GLOBAL TRADE ANALYSIS GOVERNMENT SPENDING HOUSEHOLD BUSINESS HOUSEHOLD EARNINGS HOUSEHOLD INCOME HOUSEHOLD INCOMES HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPORT TARIFFS INCOME EFFECT INCOME INEQUALITY INCOME LEVEL INCOME LEVELS INSURANCE INTERNATIONAL BANK INTERNATIONAL ECONOMICS INTERNATIONAL ECONOMY INTERNATIONAL INVESTMENT INTERNATIONAL TRADE INVESTING LABOR MARKET LABOR MARKETS LAND HOLDINGS LANDLESS LABORERS MACROECONOMIC SHOCKS MACROECONOMICS MARKET ACCESS MARKET PRICE MARKET WAGES MULTILATERAL TRADE MULTILATERAL TRADE LIBERALIZATION NATIONAL INCOME NATURAL RESOURCES OUTPUT PER CAPITA INCOME PER CAPITA INCOMES PERFECT COMPETITION POWER PARITY PRICE CHANGES PRICE DECLINES PRICE INCREASES PRIMARY FACTORS PRODUCTION FUNCTION PROTECTION ESTIMATES PURCHASING POWER QUOTA RENTS REAL INCOME RETURNS SAVINGS SPECIALIZATION TARIFF DATA TARIFF RATES TARIFF REVENUE TAX TAX REVENUES TRADE BARRIERS TRADE LIBERALIZATION TRADE MODELS TRADE POLICIES TRADE POLICY TRADE REFORM TRADING TRADING SYSTEM TRANSFER PAYMENTS UNILATERAL TRADE UNSKILLED LABOR UNSKILLED WORKERS UTILITY FUNCTION WAGE RATES WAGES WELFARE IMPACTS WORLD ECONOMY WORLD PRICES WORLD TRADE WORLD TRADE ORGANIZATION WTO
Online Access:	http://documents.worldbank.org/curated/en/2004/05/17742609/earnings-effects-multilateral-trade-liberalization-implications-poverty http://hdl.handle.net/10986/17157

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Summary:	Most researchers examining poverty and multilateral trade liberalization have had to examine average, or per capita effects, suggesting that if per capita real income rises, poverty will fall. This inference can be misleading. Combining results from a new international cross-section consumption analysis with earnings data from household surveys, this article analyzes the implications of multilateral trade liberalization for poverty in Indonesia. It finds that the aggregate reduction in Indonesia's national poverty headcount following global trade liberalization masks a more complex set of impacts across groups. In the short run the poverty headcount rises slightly for self-employed agricultural households, as agricultural profits fail to keep up with increases in consumer prices. In the long run the poverty headcount falls for all earnings strata, as increased demand for unskilled workers lifts incomes for the formerly self-employed, some of whom move into the wage labor market. A decomposition of the poverty changes in Indonesia associated with different countries' trade policies finds that reform in other countries leads to a reduction in poverty in Indonesia but that liberalization of Indonesia's trade policies leads to an increase. The method used here can be readily extended to any of the other 13 countries in the sample.

The Earnings Effects of Multilateral Trade Liberalization : Implications for Poverty

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