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Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions

Kym Anderson (), John Cockburn () and Will Martin ()

No 7749, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries, yet global trade in farm products continues to be far more distorted than trade in nonfarm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modeling. This paper summarizes a series of new economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global LINKAGE model results suggest that removing those remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 percent. The analysis based on the Global Trade Analysis Project (GTAP) model for a sample of 15 countries, and ten stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.

Keywords: farm trade policy; income inequality; Poverty; price distortions (search for similar items in EconPapers)
JEL-codes: D30 D58 D63 F13 O53 Q18 (search for similar items in EconPapers)
Date: 2010-03
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Related works:
Journal Article: Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions (2011)
Working Paper: Would freeing up world trade reduce poverty and inequality ? the vexed role of agricultural distortions (2011) Downloads
Working Paper: Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions (2010) Downloads
Working Paper: Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions (2009) Downloads
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