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The World Trade SystemTrends and Challenges$
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Jagdish N. Bhagwati, Pravin Krishna, and Arvind Panagariya

Print publication date: 2017

Print ISBN-13: 9780262035231

Published to MIT Press Scholarship Online: September 2017

DOI: 10.7551/mitpress/9780262035231.001.0001

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Trade, Poverty, and Inequality

Trade, Poverty, and Inequality

Chapter:
(p.55) 3 Trade, Poverty, and Inequality
Source:
The World Trade System
Author(s):

Devashish Mitra

Publisher:
The MIT Press
DOI:10.7551/mitpress/9780262035231.003.0003

This chapter discusses how trade can affect poverty through a large number of channels, based on growth, efficiency and distribution. The redistributive channels also affect inequality. Case studies of China and India show that the country with the greater rise in inequality, namely China, has grown faster and seen bigger poverty reductions. Cross-country regressions also show the possibility of a poverty reducing impact of trade reforms. And, there exists considerable evidence for specifically the growth channel. Most of the intra-country studies, both direct, reduced-form ones, as well as those based on empirical general-equilibrium analysis, also provide strong support for the poverty-reducing effects of trade. Moving to inequality, many aspects, such as wage inequality, overall income inequality and labor shares, have been studied. The chapter shows that the evidence on the impact of trade on inequality has been quite mixed.

Keywords:   Trade, Poverty, Inequality, Growth, Wage Inequality, Labor Shares, Cross Country Studies, General Equilibrium, China, India

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