Distributional effects of multilateral and preferential trade liberalisation: The case of Paraguay

Abstract

The aim of this work is to dissect the distributional impact of preferential and multilateral trade liberalisation on household well-being using individual level data for Paraguay never exploited so far. For this purpose, the intrazone and applied most favored nation (MFN) tariff pass-through rate on the prices of traded goods is estimated, and the impacts of trade induced price changes on households as consumers and as income earners are calculated. The results indicate that trade liberalisation has benefited households along the entire income distribution and, most importantly, show that these benefits differ according to the type of liberalisation policies implemented.