Factor Immobility and Regional Impacts of Trade Liberalization Evidence on Poverty from India

47 Pages Posted: 1 Feb 2011

Date Written: September 2010

Abstract

This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile, at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors.

Keywords: Fiscal reforms, Income distribution, India, International trade, Nontariff barriers, Poverty, Private consumption, Protectionism, Tariffs, Trade liberalization, Trade policy

Suggested Citation

Topalova, Petia B., Factor Immobility and Regional Impacts of Trade Liberalization Evidence on Poverty from India (September 2010). IMF Working Papers, Vol. , pp. 1-46, 2010. Available at SSRN: https://ssrn.com/abstract=1750706

Petia B. Topalova (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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