Trading out of poverty: Cross-country evidence on the impact of trade liberalisation on poverty
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2021-07-07
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en
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This thesis examines the impact of trade liberalisation on poverty by estimating a fixed-effects model on 43 countries and 533 districts in the period 1992-2018. I find that tariff cuts reduce district poverty. The predicted change in poverty rates is on average -4 percentage points – equal to an average economically relevant 16.5 percent decline – for districts experiencing an average tariff cut of -2.2. In addition, I find that average tariff reductions increase district wealth levels – measured as the value of asset-wealth of the average household – by 3 percent on average. These results are robust to a number of sample changes, such as restricted years, interpolation and largest and smallest changes. The effect is not robust to sample changes by continents, however, this is likely due to a reversed effect for South and Central Asia as well as Egypt and Brazil making up a large share of the sample in the years prior to 2000. Moreover, I find that quality of infrastructure and labour market regulation at the national level do not significantly moderate the effect of district tariffs. To the best of my knowledge, this study is the first cross-country evidence on the link between trade and poverty, and sheds light on the contrasting results of trade liberalisation found in different case studies. By approximating poverty using the International Wealth Index (IWI) I account for both the income and consumption effect on poverty. My findings indicate that trade liberalisation is a valid tool for poverty alleviation.
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Faculteit der Managementwetenschappen