Trade and Poverty in the Poor Countries

Bhagwati, Jagdish N.; Srinivasan, T. N.

While freer trade, or "openness" in trade, is now widely regarded as economically benign, in the sense that it increases the size of the pie, the recent anti-globalization critics have suggested that it is socially malign on several dimensions, among them the question of poverty. Their contention is that trade accentuates, not ameliorates, and that it deepens, not diminishes, poverty in both the rich and the poor countries. The theoretical and empirical analysis of the impact of freer trade on poverty in the rich and in the poor countries is not symmetric, of course. We focus here only on the latter. In doing so, we distinguish between two different strands of argumentation: static and dynamic.



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American Economic Review

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September 5, 2012