Trade Liberalisation and Poverty: The Empirical Evidence

Abstract

This paper assesses the current state of evidence on the widely debated issue of the impact of trade policy reform on poverty in developing countries.There is relatively little empirical evidence addressing this question directly, but a lot of related evidence concerning specific aspects.This paper summarises this based on an analytic framework which addresses four key areas: economic growth and stability; households and markets; wages and employment and government revenue.Within this framework twelve key questions are identified.We argue strongly that there can be no simple generalisable conclusion about the relationship between trade liberalisation and poverty, so that the picture is much less negative than is often suggested in popular debate.In the long run and on average, trade liberalisation is highly likely to be poverty alleviating, and there is no convincing evidence that it will generally increase overall poverty or vulnerability.But trade reform also involves important adjustments, and there is evidence that the poor may be less well placed in the short run to protect themselves against adverse effects and take advantage of favourable opportunities.