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Trade Liberalization and Poverty Reduction: New Evidence from Indian States

Author

Listed:
  • J.Salcedo Cain
  • Rana Hasan
  • Devashish Mitra

Abstract

As is widely acknowledged, the incidence of poverty in India has declined steadily over the last several decades. What is debated, however, is the pace at which poverty has declined and its relationship with India's economic reforms. In particular, a key concern among policymakers and researchers alike is that trade liberalization undertaken in the early 1990s may have slowed the progress made in reducing poverty. In this paper, we update our previous econometric analysis on the links between trade liberalization and poverty reduction in India. By incorporating measures of poverty based on the 2004-05 consumer expenditure survey carried out by India's National Sample Survey Organisation, we are able to sidestep the controversy-ridden poverty measures based on the 1999-2000 survey. Our new results are in line with the earlier ones in Hasan, Mitra and Ural (2007): States, and regions within states, that were more exposed to trade liberalization on account of their employment structures did not experience slower reduction in poverty; on the contrary, to the extent that we find a statistically significant relationship between trade liberalization and poverty reduction, the evidence points to faster poverty reduction in states and regions experiencing greater increases in exposure to trade. Moreover, this relationship is typically stronger in states with more flexible labor regulations, better quality transportation infrastructure, and more developed financial systems.

Suggested Citation

  • J.Salcedo Cain & Rana Hasan & Devashish Mitra, 2010. "Trade Liberalization and Poverty Reduction: New Evidence from Indian States," Working Papers 3333, School of International and Public Affairs, Columbia University, revised Nov 2010.
    • Handle: RePEc:ecq:wpaper:3333
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    References listed on IDEAS

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    3. Sen Gupta, Abhijit & Hasan, Rana & Lamba, Sneha, 2014. "Growth, Structural Change, and Poverty Reduction: Evidence from India," MPRA Paper 55247, University Library of Munich, Germany.
    4. L. Alan Winters & Antonio Martuscelli, 2014. "Trade Liberalization and Poverty: What Have We Learned in a Decade?," Annual Review of Resource Economics, Annual Reviews, vol. 6(1), pages 493-512, October.
    5. Dhamija, Nidhi, 2019. "Trade Liberalization and Unemployment in India: A State Level Analysis," MPRA Paper 95001, University Library of Munich, Germany.
    6. Devashish Mitra, 2019. "Responses to Trade Opening: Evidence and Lessons from Asia," Working Papers id:12977, eSocialSciences.
    7. Muhammad Shahid Hassan & Samra Bukhari & Noman Arshed, 2020. "Competitiveness, governance and globalization: What matters for poverty alleviation?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(4), pages 3491-3518, April.
    8. Arun Jaitley, 2018. "Economic Survey 2017: Volume I, Chapter 5: Is there a “Late Converger Stall†in Economic Development? Can India Escape it?," Working Papers id:12444, eSocialSciences.
    9. Isis Gaddis & Janneke Pieters, 2017. "The Gendered Labor Market Impacts of Trade Liberalization: Evidence from Brazil," Journal of Human Resources, University of Wisconsin Press, vol. 52(2), pages 457-490.
    10. Devashish Mitra, 2016. "Trade liberalization and poverty reduction," IZA World of Labor, Institute of Labor Economics (IZA), pages 272-272, June.

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