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American Economic Journal: Applied Economics: Vol. 2 No. 4 (October 2010)

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Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India

Article Citation

Topalova, Petia. 2010. "Factor Immobility and Regional Impacts of Trade Liberalization: Evidence on Poverty from India." American Economic Journal: Applied Economics, 2(4): 1-41.

DOI: 10.1257/app.2.4.1

Abstract

This paper uses the 1991 Indian trade liberalization to measure the impact of trade liberalization on poverty, and to examine the mechanisms underpinning this impact. Variation in sectoral composition across districts and liberalization intensity across production sectors allows a difference-in-difference approach. Rural districts, in which production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth. The impact of liberalization was most pronounced among the least geographically mobile at the bottom of the income distribution, and in Indian states where inflexible labor laws impeded factor reallocation across sectors. (JEL F13, I32, O15, O18, O19, O24)

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Authors

Topalova, Petia (IMF)

JEL Classifications

F13: Trade Policy; International Trade Organizations
I32: Measurement and Analysis of Poverty
O15: Economic Development: Human Resources; Human Development; Income Distribution; Migration
O18: Economic Development: Regional, Urban, and Rural Analyses; Transportation
O19: International Linkages to Development; Role of International Organizations
O24: Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy

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