The Impact of Trade Liberalisation on Household Welfare in a Developing Country with Imperfect Labour Markets

Ganesh Seshan ()

Journal of Development Studies, 2014, vol. 50, issue 2, 226-243

Abstract: I develop an empirical methodology to assess the distributional impact of trade-induced price shocks when labour markets are imperfect. The proposed methodology relates exogenous variations in prices to changes in household welfare using a separable agricultural household model that flexibly allows the data to determine the degree of labour market imperfections. Applying this approach to Vietnam, I investigate the impact of agriculture trade liberalisation between 1993 and 1998 on overall household welfare, measured using per capita household expenditure. I find that accounting for labour market imperfections results in welfare gains that are nearly four times larger than those found when assuming complete labour markets.

Date: 2014
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DOI: 10.1080/00220388.2013.833324

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