Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions

29 Pages Posted: 5 Apr 2011

See all articles by Kym Anderson

Kym Anderson

University of Adelaide - Centre for International Economic Studies (CIES); Centre for Economic Policy Research (CEPR); Australian National University

John Cockburn

Partnership for Economic Policy (PEP); Université Laval; Partnership for Economic Policy (PEP)

Will J. Martin

International Food Policy Research Institute (IFPRI)

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Abstract

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 non-farm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modelling. This article summarises 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 L 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 per cent. 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.

Suggested Citation

Anderson, Kym and Cockburn, John and Martin, William J., Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions. The World Economy, Vol. 34, No. 4, pp. 487-515, 2011. Available at SSRN: https://ssrn.com/abstract=1802926 or http://dx.doi.org/10.1111/j.1467-9701.2011.01339.x

Kym Anderson (Contact Author)

University of Adelaide - Centre for International Economic Studies (CIES) ( email )

School of Economics
Adelaide SA 5005
Australia
+61 8 8313 4712 (Phone)
+61 8 8223 1460 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Australian National University ( email )

Arndt-Corden Dept of Economics
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Canberra, AK ACT 2600
Australia
+61 8 8313 4712 (Phone)

HOME PAGE: http://publicpolicy.anu.edu.au/crawford_people/content/staff/acde/kanderson.php

John Cockburn

Partnership for Economic Policy (PEP) ( email )

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

Université Laval ( email )

Dept. of Economics
Québec, Quebec G1V 0A6
Canada

Partnership for Economic Policy (PEP) ( email )

Duduville Campus, Kasarani
P.O. Box 30772-00100
Nairobi
Kenya

William J. Martin

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

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