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Does Trade Reduce Poverty? A View from Africa

ABSOLUTE POVERTY ABSOLUTE VALUE AVERAGE TRADE BARRIERS TO ENTRY BENEFITS OF TRADE BOND CAPITAL ACCUMULATION CAPITAL GOODS COMPARATIVE ADVANTAGE COMPETITION POLICY CONSUMER PRICE INDEX CONSUMER PRICES COUNTRY CHARACTERISTICS COUNTRY LEVEL COUNTRY RISK CROSS-COUNTRY ANALYSIS DEPENDENT VARIABLE DEVELOPED WORLD DEVELOPING COUNTRIES DEVELOPING ECONOMIES DEVELOPMENT ECONOMICS DEVELOPMENT INDICATORS DEVELOPMENT POLICY DEVELOPMENT RESEARCH DEVELOPMENT STRATEGIES DOMESTIC CREDIT DYNAMIC PANEL ECONOMETRIC ANALYSIS ECONOMETRICS ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC GROWTH ECONOMIC INTEGRATION ECONOMIC LITERATURE ECONOMIC POLICY ECONOMIC REFORM ECONOMIC STUDIES ECONOMIC VOLATILITY ECONOMICS LETTERS EDUCATION LEVEL EMPIRICAL EVIDENCE EMPIRICAL LITERATURE EMPIRICAL RESULTS ERROR TERM EXPLANATORY VARIABLES EXPORTS EXPOSURE FACTOR ENDOWMENTS FACTOR PRICES FINANCIAL DEPTH FINANCIAL DEVELOPMENT FINANCIAL MARKETS FINANCIAL SECTOR FINANCIAL SECTORS FINANCIAL SYSTEM FOREIGN COMPETITION GDP GDP PER CAPITA GLOBAL ECONOMY GLOBALIZATION GROWTH REGRESSIONS HEADCOUNT POVERTY HEADCOUNT RATIO HUMAN CAPITAL IMPACT OF TRADE IMPORTS INCOME INCOME DISTRIBUTION INCOME INEQUALITY INCOMES INFLATION INSTITUTIONAL ENVIRONMENT INTERNATIONAL COMPETITION INTERNATIONAL ECONOMICS INTERNATIONAL TRADE INVESTMENT CLIMATE LABOR MARKET LAGGED VALUES LEGAL SYSTEM LONG RUN MACROECONOMIC ENVIRONMENT MACROECONOMIC STABILITY MACROECONOMICS MEASURE OF TRADE MONETARY ECONOMICS NATURAL RESOURCES NEGATIVE EFFECT NON-TARIFF BARRIERS 0 HYPOTHESIS OPEN ECONOMIES OUTPUT POLICY MEASURES POLICY REFORMS POLICY RESEARCH POOR COUNTRIES POOR PEOPLE POOR POLICIES POVERTY ALLEVIATION POVERTY GAP POVERTY LINE POVERTY REDUCTION PRICE INDEX PRIMARY EDUCATION PRIVATE SECTOR CREDIT PRO-POOR PROPERTY RIGHTS RAPID GROWTH REAL INCOME RESOURCE ALLOCATION SERIAL CORRELATION SPECIALIZATION STANDARD DEVIATION STRUCTURAL CHARACTERISTICS TARIFF BARRIERS TARIFF DATA TARIFF RATES TECHNOLOGICAL CHANGE TRADE AGREEMENTS TRADE DATA TRADE EFFECTS TRADE LIBERALIZATION TRADE OPENING TRADE OPENNESS TRADE POLICIES TRADE POLICY TRADE PROTECTION TRADE REFORM TRADE REFORMS TRADE REGIME TRADE RESTRICTIONS UNSKILLED LABOR WAGE DIFFERENTIALS WAGE INEQUALITY WAGE STRUCTURE WAGES WELFARE GAINS WORLD DEVELOPMENT INDICATORS WTO
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World Bank, Washington, DC
Africa
2013-01-28T17:32:34Z | 2013-01-28T17:32:34Z | 2013-01

Although trade liberalization is being actively promoted as a key component in development strategies, theoretically, the impact of trade openness on poverty reduction is ambiguous. A more liberalized trade regime is argued to change relative factor prices in favor of the more abundant factor. If poverty and relative low income stem from abundance of labor, greater trade openness should lead to higher labor prices and a decrease in poverty. However, should the re-allocation of factors be hampered, the expected benefits from freer trade may not materialize. The theoretical ambiguity on the effects of openness is reflected in the available empirical evidence. This paper examines how the effect of trade openness on poverty may depend on complementary reforms that help a country take advantage of international competition. Using a non-linear regression specification that interacts a proxy of trade openness with proxies of various country structural specificities and a panel of 30 African countries over the period 1981-2010, the analysis finds that trade openness tends to reduce poverty in countries where financial sectors are deep, education levels high and governance strong.

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