When Does Trade Hurt? Market, Transition and Developing Economies

Kala Krishna () and Cemile Yavas

No 8995, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper argues that labor market distortions in transition and developing economies help explain differential impacts of trade liberalization. We assume that workers differ in ability. In a market economy their earnings depend on their ability. However, earnings are independent of ability due to a common wage set in manufacturing in a transition economy and because of family farms in a developing economy. Our work suggests that trade liberalization without structural reform can have serious adverse effects in transition and developing economies: there can even be mutual losses from trade.

JEL-codes: F16 O17 (search for similar items in EconPapers)
Date: 2002-06
New Economics Papers: this item is included in nep-dev
Note: ITI
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Citations: View citations in EconPapers (3)

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