Tariff Pass-Through and the Distributional Effects of Trade Liberalization

Beyza Ural Marchand

No 2011-22, Working Papers from University of Alberta, Department of Economics

Abstract: This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradeable goods and wages. The cost of consumption for each household is affected by the domestic price changes, while wage incomes adjust to these price changes in equilibrium. Three rounds of the Indian Employment and Consumption Surveys are used for the analysis. The price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices. In order to assess the distributional effects, a series of nonparametric local linear regressions are estimated. The findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization, while the average effect was generally pro-poor and varied significantly across the per capita expenditure spectrum.

Keywords: trade liberalization; pass-through; wages; India; welfare distribution (search for similar items in EconPapers)
JEL-codes: D31 F14 O12 O15 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2011-12-01
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (2)

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Journal Article: Tariff pass-through and the distributional effects of trade liberalization (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2011_022

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