Factor Immobility and Regional Impacts of Trade Liberalization Evidenceon Poverty From India
IMF Working Papers, September 1, 2010
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Bibliographic details
- Authors: Petia Topalova
- Published: September 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455208838.001
Summary
- Author: Petia Topalova
- Date: September 1, 2010
- Research question: Measures the impact of the 1991 Indian trade liberalization on poverty and examines the mechanisms underpinning this impact.
- Core approach: Uses variation in sectoral composition across districts and liberalization intensity across production sectors to implement a difference-in-difference approach.
- High-level finding: Rural districts, where production sectors more exposed to liberalization were concentrated, experienced slower decline in poverty and lower consumption growth.
Key findings
- Rural exposure and outcomes:
- Rural districts with production sectors more exposed to liberalization experienced slower decline in poverty.
- The same districts experienced lower consumption growth.
- Distributional impacts:
- The impact of liberalization was most pronounced among the least geographically mobile.
- The impact was most pronounced at the bottom of the income distribution.
- Institutional constraints:
- Impacts were larger in Indian states where inflexible labor laws impeded factor reallocation across sectors.
Mechanisms and interpretation
- Identification strategy:
- Exploits variation in sectoral composition across districts and differential liberalization intensity across production sectors to identify causal effects via difference-in-difference.
- Mechanism emphasis:
- Factor immobility (limited geographic labor mobility and rigid labor laws) constrained adjustment to trade shocks, amplifying negative effects on poverty reduction and consumption growth in affected districts.
- Heterogeneity:
- Effects vary by geographic mobility, income position, and state-level labor market flexibility.
Policy-relevant implications
- Labor mobility and flexibility:
- Policies that facilitate factor reallocation (for example, reducing barriers to geographic mobility and addressing rigid labor regulations) can mitigate adverse regional and distributional impacts of trade liberalization.
- Targeting and safety nets:
- Trade reforms may require complementary measures targeted at the least geographically mobile and those at the bottom of the income distribution to prevent slower poverty reduction and consumption shortfalls in exposed regions.
Key statistics and identifiers
- Pages: 46
- Series: Working Paper No. 2010/218
- Issue: 218
- Volume: 2010
- ISBN: 9781455208838
- ISSN: 1018-5941
- DOI: https://doi.org/10.5089/9781455208838.001
Italic: IMF Working Papers — Factor Immobility and Regional Impacts of Trade Liberalization Evidenceon Poverty From India, Petia Topalova, September 1, 2010.
Content in this bundle
- _wp10218 - Appendix Table