Who Gains from Free Trade: Export-Led Growth, Inequality and Poverty in Latin America

by Vos; Rob

• ISBN13: 9780415770446
• ISBN10: 0415770440
• Edition: 1st
• Format: Hardcover
• Copyright: 2006-07-27
• Publisher: Routledge

Summary

Since the late 1980s, almost all Latin American countries have gone through a process of far-reaching economic reforms, featuring in particular trade, financial and capital account liberalization. At first the reforms seemed to be working as promised and trade expanded. However, at the turn of the century, the economies have shown unstable and rather dismal growth. Some argue trade liberalization is partly to be blamed for this. Who Gains from Free Trade examines the extent to which trade reforms have been an important source of the slowdown of economic growth, rising inequality and rising poverty as observed in many parts of the region. This volume presents an comprehensive analysis of this important topic, utilizing research based on 16 country narratives of policy reform and economic performance; rigorous general equilibrium (CGE) modelling of the economy-wide effects of trade reform for all country cases; alongside application of an innovative method of microsimulations to assess theemployment and factor income distribution impact of policy reforms on poverty and inequality at the household level. The study finds that trade liberalization and the switch to export-led growth are not the cause of the growth slowdown in Latin America. Nor are they the cause of rising poverty and inequality. If anything, the impact on growth and poverty in general has been positive, but very small. Thus, further trade opening is neither the solution to the region's economic woes, nor should we expect any disastrous implications for aggregate poverty.

Table of Contents

List of tables and figures	xii
About the authors	xviii
Preface	xx
1 Introduction	1	(7)
Rising exports, slower growth and greater inequality: is trade liberalization to blame?
ROB VOS, ENRIQUE GANUZA AND SAMUEL MORLEY
1.1 Reforms and dismal growth	1	(1)
1.2 The analytical approach of this study	2	(2)
1.3 Overview of the main findings	4	(2)
Notes	6	(1)
References	6	(2)
2 Bad luck or wrong policies?	8	(47)
External shocks, domestic adjustment and growth slowdown in Latin America and the Caribbean
SAMUEL MORLEY AND ROB VOS
2.1 Introduction	8	(5)
2.2 Bad luck? External shocks during the 1990s	13	(10)
2.3 Failed adjustment or policies? The nature of domestic adjustment	23	(5)
2.4 Conclusions	28	(1)
Appendix A2:
A2.1 A methodology for estimating external shocks and domestic response	29	(1)
A2.2 Decomposition of changes in current account deficit	33	(1)
A2.3 Average current account balance	45	(1)
A2.4 Macroeconomic decomposition of economic growth	46	(1)
A2.5 Sectoral growth decomposition	51	(1)
Notes	51	(3)
References	54	(1)
3 Are export promotion and trade liberalization good for Latin America's poor?	55	(70)
A comparative macro—micro CGE analysis
ENRIQUE GANUZA, SAMUEL MORLEY, SHERMAN ROBINSON, VALERIA PIÑEIRO AND ROB VOS
3.1 Macro—micro modelling of trade reforms	55	(1)
3.2 CGE model strategy	56	(10)
3.3 Macro CGE simulations: counterfactual analysis of effects of trade reforms and external shocks	66	(25)
3.4 The impact of policy simulations on poverty and inequality	91	(5)
3.5 Conclusions	96	(2)
Appendix A3	98	(23)
Notes	121	(1)
References	122	(3)
4 Argentina — the convertibility plan, trade openness, poverty and inequality	125	(25)
CAROLINA DIAZ-BONILLA, EUGENIO DIAZ-BONILLA. VALERIA PIÑEIRO AND SHERMAN ROBINSON
Abstract	125	(1)
4.1 Introduction	126	(1)
4.2 General policy framework and economic performance	127	(3)
4.3 Current account and trade performances	130	(2)
4.4 Structure of the CGE model and simulation results	132	(7)
4.5 Microsimulations: methodology and results	139	(7)
4.6 Conclusions and issues for further research	146	(1)
Notes	147	(1)
References	148	(2)
5 Bolivia — export promotion and its effects on growth, employment and poverty	150	(34)
WILSON JIMÉNEZ
Abstract	150	(1)
5.1 Introduction	151	(1)
5.2 Macroeconomic policies and export promotion	152	(10)
5.3 The labour market and income inequality	162	(2)
5.4 Effect of exports on employment and wages	164	(11)
5.5 Conclusions and policy implications	175	(3)
Appendix A5	178	(2)
Notes	180	(2)
References	182	(2)
6 Brazil — the impact of trade openness on employment, poverty and inequality	184	(20)
FRANCISCO GALRÃO CARNEIRO AND JORGE SABA ARBACHE
Abstract	184	(1)
6.1 Introduction	184	(1)
6.2 Macroeconomic background and structural reforms	185	(3)
6.3 Sector and export growth	188	(4)
6.4 Counterfactual CGE model simulations	192	(7)
6.5 Microsimulations of the impact of trade on poverty and inequality	199	(2)
6.6 Conclusions	201	(1)
Notes	202	(1)
References	203	(1)
7 Costa Rica — export orientation and its effect on growth, inequality and poverty	204	(27)
MARCO V. SÁNCHEZ C. AND PABLO SAUMA
Abstract	204	(27)
7.1 Introduction	205	(1)
7.2 Reforms and macroeconomic performance	205	(6)
7.3 Trends in employment, inequality and poverty	211	(3)
7.4 Exports, employment, inequality and poverty: a counterfactual analysis	214	(9)
7.5 Conclusions	223	(2)
Appendix A7	225	(3)
Notes	228	(1)
References	229	(2)
8 Cuba — export promotion, poverty, inequality and growth in the 1990s	231	(39)
ANGELA FERRIOL, XUAN HOANG, ALFREDO GONZÁLEZ AND ALINA HERNÁNDEZ
Abstract	231	(1)
8.1 Introduction	232	(3)
8.2 Economic reforms: peculiarities of the Cuban case 232 8.3 Macroeconomic performance	235	(2)
8.4 Exports	237	(1)
8.5 Productivity and employment	238	(3)
8.6 Inequality and poverty	241	(1)
8.7 Counterfactual analysis	242	(9)
8.8 Impacts of simulated policies on inequality and poverty	251	(2)
8.9 Conclusions	253	(2)
Appendix A8	255	(13)
Notes	268	(1)
References	268	(2)
9 Ecuador – dollarization, trade liberalization and poverty	270	(32)
ROB VOS AND MAURICIO LEÓN
Abstract	270	(1)
9.1 Introduction	271	(1)
9.2 Macroeconomic performance and external shocks	272	(4)
9.3 Trade liberalization, macroeconomic policies and export promotion	276	(5)
9.4 Labour market adjustment and poverty during the 1990s	281	(3)
9.5 A SAM and CGE model for Ecuador	284	(2)
9.6 Microsimulation methodology	286	(1)
9.7 CGE macro–microsimulations: effects of trade liberalization and external shocks on employment and factor incomes	287	(10)
9.8 Concluding remarks	297	(1)
Appendix A9	298	(1)
Notes	299	(1)
References	300	(2)
10 Mexico – do the poor benefit from increased openness?	302	(27)
SAMUEL A. MORLEY AND CAROLINA DIAZ-BONILLA
Abstract	302	(1)
10.1 Introduction	303	(1)
10.2 Macroeconomic overview: 1980-99	303	(4)
10.3 Opening the Mexican economy	307	(1)
10.4 A decomposition analysis of the sources of growth since 1980	308	(5)
10.5 A CGE model for Mexico	313	(2)
10.6 Policy experiments and simulation results	315	(6)
10.7 The impact of export-led growth on poverty and distribution: the microsimulations	321	(5)
10.8 Conclusion	326	(1)
Notes	327	(1)
References	327	(2)
11 Peru — impact analysis of trade liberalization on poverty and inequality	329	(32)
ALONSO SEGURA VASI AND JUAN GARCIA CARPIO
Abstract	329	(1)
11.1 Introduction	330	(1)
11.2 Evolution of the economy in the 1990s	330	(7)
11.3 CGE analysis of the impact of trade liberalization and shocks	337	(12)
11.4 Impact of external shocks and trade reform on poverty and inequality	349	(7)
11.5 Concluding remarks	356	(2)
Notes	358	(2)
References	360	(1)
12 Uruguay — export growth, poverty and income distribution	361	(32)
SILVIA LAENS AND MARCELO PERERA
Abstract	361	(1)
12.1 Introduction	362	(1)
12.2 Macroeconomic performance and economic reforms	362	(5)
12.3 Sector and export growth	367	(5)
12.4 Counterfactual CGE model simulations	372	(11)
12.5 Impact on poverty and inequality at the household level	383	(4)
12.6 Conclusions	387	(3)
Appendix A12	390	(1)
Notes	391	(1)
References	391	(2)
Index	393