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Trade Liberalization, Poverty, and Inequality: Evidence from Indian Districts

Trade Liberalization, Poverty, and Inequality: Evidence from Indian Districts

Chapter:
(p.291) 7 Trade Liberalization, Poverty, and Inequality: Evidence from Indian Districts
Source:
Globalization and Poverty
Author(s):
Petia Topalova
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226318004.003.0008

This chapter evaluates the impact of trade reform in India on poverty. It suggests that the rural poor gained less from the trade reforms than other income groups or the urban poor. It also illustrates that trade liberalization led to an increase in the poverty rate and the poverty gap in the rural districts where industries more exposed to liberalization were concentrated. In addition, the differential tariff changes across industries between 1991 and 1997 were as unrelated to the state of the industries as can be reasonably hoped for in a real-world setting. The most pronounced effects on poverty occurred in areas with inflexible labor laws (those that saw no change in industrial structure in response to trade liberalization) while inequality rose as a result of trade liberalization in areas with flexible labor laws.

Keywords:   trade reform, India, poverty, trade liberalization, tariff, labor laws

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