Openness and Poverty in the Postwar United States

Jang Jin

Review of International Economics, 1998, vol. 6, issue 4, 580-91

Abstract: Recent trade theory suggests that freer trade can be the primary cause of the observed rise of poverty in the United States. The short-run dynamic relationships between openness and poverty are examined using the concept of Granger causality. That the ultimate source of rising poverty since 1973 is trade liberalization of the US economy cannot be rejected. The result is convincing when two subsamples (pre- and post-1973) are reestimated. These findings are at odds with the conventional model in which freer trade raises productivity and hence reduces the poverty rate, but appear consistent with some models in which openness raises poverty. Copyright 1998 by Blackwell Publishing Ltd.

Date: 1998
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