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Would freeing up world trade reduce poverty and inequality ? the vexed role of agricultural distortions
 
Author:Anderson, Kym; Cockburn, John; Martin, Will; Collection Title:Policy Research working paper ; no. WPS 5603
Country:World; Date Stored:2011/03/21
Document Date:2011/03/01Document Type:Policy Research Working Paper
Language:EnglishMajor Sector:Health and other social services; Industry and trade
Rel. Proj ID:1W-Trade And Poverty -- -- P074752;Region:The World Region
Report Number:WPS5603Sub Sectors:Other social services; General industry and trade sector
SubTopics:Achieving Shared Growth; Rural Poverty Reduction; Economic Theory & Research; Emerging Markets; Trade PolicyTF No/Name:TF029755-BNPP-TRADE:
Volume No:1 of 1  

Summary: Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries, yet global trade in farm products continues to be far more distorted than trade in nonfarm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modeling. This paper summarizes a series of new economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global LINKAGE model results suggest that removing those remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 percent. The analysis based on the Global Trade Analysis Project model for a sample of 15 countries, and nine stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.

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