Trade Liberalization, Inequality, and Poverty in Brazilian States

Abstract

This paper studies the impact of trade liberalization and international trade on household income inequality and poverty using detailed micro-data across Brazilian states, from 1987 to 2005. Results suggest that Brazilian states that were more exposed to tariff cuts experienced smaller reductions in household poverty and inequality. If significance of results on Brazilian states depends on the choice of poverty and inequality indicators, robust and contrasting results emerge when we disaggregate into rural and urban areas within states. Trade liberalization contributes to poverty and inequality increases in urban areas and may be linked to inequality declines in rural areas (no significant effect on rural poverty appears from our study). In terms of observed integration to world markets, import penetration plays a similar role as trade liberalization for Brazilian states as a whole. On the contrary, rising export exposure appears to have significantly reduced both measures of household welfare.

Trade Liberalization and Poverty: What Have We Learned in a Decade?

“…Moreover, in earlier related work, Topalova (2007) finds, albeit in somewhat less technically secure estimates, that whereas import exposure increases poverty, export exposure over this period reduces it. Castilho et al (2012) find a similar dichotomy between exportand import-oriented results in Brazil. For all their elegance, Topalova's (2010) estimates do not take us much closer to answering the question of whether liberalization helped to reduce Indian poverty.…”

Trade Openness, Inequality and Poverty in Latin American Countries

“…As a result, some researchers have focused on the interaction among trade openness, inequality and poverty. Some empirical studies revealed that trade openness has influenced income inequality or poverty negatively (Bucciferro, 2010;Castilho et al, 2012), while other studies revealed that trade openness affected income inequality or poverty positively (Khan and Bashir, 2013;Wahiba, 2013;Székely and Samano, 2012). Furthermore, relatively few studies have reached a conclusion that there has been no statistical relationship among trade openness, income inequality and poverty (Khan and Bashir, 2013;Trabelsi and Liouane, 2013).…”

Trading for Sustainable Development Goals: Trade Policy, Inequality and Poverty in Emerging Economies

“…However, some studies did not find any significant relationship between trade and income inequality (Edwards, 1997;Li et al, 1998;Vivarelli, 2004). Castilho et al (2012) studied trade liberalization, poverty and inequality issues in Brazilian states and they came to a conclusion that trade liberalization increases the poverty and inequality in urban areas while it may reduce the inequality in the countryside. Perera et al (2014) identified the little bit different result that income inequality and poverty both fall in urban, rural, and estate sectors in Sri Lanka due to trade openness.…”