The Distributional Impacts of Trade

FIGURE 4.1 Overview of Complementary Policies

Policy focus

Reduce distortions and strengthen the functioning of markets

Policy objective

Policy response

Example

Key considerations

Increase contestability to facilitate ﬁrm entry and investment

Improve business environment

Strengthen the investment framework

Focus on long-term investors

Support ﬁrms' ability to export

Strengthen ﬁrm productivity

Facilitate linkages to smaller ﬁrms

Do not sustain "zombie ﬁrms"

Pass on beneﬁts to consumers

Ensure competitive markets

Address anticompetitive behavior

Support capacity of competition authorities

Invest in transport and ICT infrastructure

Increase capacity and quality of roads and ports

Maintain infrastructure for long term

Strengthen agricultural value chains

Improve access to ﬁnance

Ensure strong contracting environment

Address barriers to import/export across borders

Strengthen trade facilitation systems

Simplify and harmonize trade documents

Address corruption at borders

Facilitate the mobility of workers

Reduce constraints to migration

Provide training, relocation support

Address speciﬁc barriers faced by women

Support workers facing job losses

Address earnings and human capital loss

Provide unemployment insurance

Target effectively

Support lagging and rural regions Trade policy change Reduce trade costs

Speed up labor market adjustment

Source: World Bank. Note: “Zombie firms” are companies that remain in business but are unable to service their debt, making them dependent on continued support from creditors. ICT = information and communication technology.

strengthening Argentina’s global integration makes the interdependence between trade, competition, and investment explicit (Martínez Licetti et al. 2018). It proposes an agenda that covers policy reforms in all three areas at both the national and subnational levels to generate mutually reinforcing effects such as increased foreign direct investment (FDI) spillovers, a reduced exercise of market power, and productivity improvements between and within firms and sectors. In the absence of significant barriers to market contestability and distortions, increased openness to trade results in a reallocation of resources from these sectors to Fostering Inclusive Trade: A Policy Agenda 81

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The Distributional Impacts of Trade

Published on Jun 8, 2021

World Bank Publications

"Trade is a well-established driver of growth and poverty reduction.But changes in trade policy also have distributional impacts that create winners and losers. It is vital to understand and clearly communicate how trade affects economic well-being across all segments of the population, as well as how policies can more effectively ensure that the gains from trade are distributed more widely. The Distributional Impacts of Trade: Empirical Innovations, Analytical Tools, and Policy Responses provides a deeper understanding of the distributional effects of trade across regions, industries, and demographic groups within countries over time. It includes an overview (chapter 1); a review of innovations in empirical and theoretical work covering the impacts of trade at the subnational level (chapter 2); highlights from empirical case studies on Bangladesh, Brazil, Mexico, South Africa, and Sri Lanka (chapter 3); and a policy agenda to improve distributional outcomes from trade (chapter 4). This book comes at a time

Articles inside

page 33

The Distributional Impacts of Trade

Articles inside

A.1 Methodological Approaches Applied in the Case Studies

References

Flourish

Their Impacts

Implementing a Policy Agenda for Inclusive Trade

4.1 Overview of Complementary Policies

Complementary Policy Priorities for Inclusive Trade

3.1 Assessment of Trade Policy Changes on Sri Lankan Welfare

Conclusion

Subnational Level

Brazil: How Trade Shocks Affect Wages and Job Opportunities across Regions and Industries

South Africa: How Apartheid’s Legacy Shapes the Impact of Trade Liberalization on Local Communities

Bangladesh: How a Shock in Textiles and Apparel Spreads through Local Communities and across the Economy

and Are More Unequal

Mexico: How Rising Exports Affect Local Poverty and Inequality

Introduction

References

Notes

Conclusion

Imperfect Pass-Through of Tariff Prices to Consumers

2.4 New Approaches to Measure Consumption Impacts

Impacts on Consumer Prices and Cost of Living

Understanding Hefty Adjustment Costs

Tariffs Database

2.3 Informal Labor Markets and Trade

Local Labor Markets in Developing Countries

2.1 Extensions of “The China Syndrome”

A Framework for Understanding the Distributional Impacts of Trade

Value Added and Road Map

Impacts on Labor Market Outcomes

2 Understanding Winners and Losers with the Household Impacts of

ES.1 Case Studies Show Different Political and Economic Dynamics in Trade Reforms

1.4 Structure of This Report

Why Distributional Issues Matter