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

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

Case study

Knowledge gap study seeks to fill Within-country results (labor income and consumption)

Distributional impact (differences across sectors, regions, types of workers)

Mexico

Bangladesh Expansion of evidence on local distributional impacts of export shocks

South Africa Improved understanding of transitional dynamics of trade in local markets Labor income: Exports increase total labor incomes, that is, the sum of all labor incomes in the municipality. A 10 percent rise in exports per worker raises total labor incomes by 2.4 percent on average. However, since exports also increase labor supply at the local level, average labor incomes do not change. Welfare: Between 2004 and 2014, export growth led to higher income growth among households in the two poorest deciles in urban areas. Labor income and informality: Between 2005 and 2016, subdistricts more exposed to the export shocks experienced an increase in average annual wages in the short term (2005–10) relative to less exposed subdistricts and a decrease in informality in the short term (2005–10), with this spreading through the economy over time. Since the positive impacts of exports on household incomes are concentrated in the poorest deciles, inequality falls. In particular, the Gini index declines by around 0.17 point (using a 0-100 scale) if the exports-toworker ratio rises by 10 percent. Export growth increases in-migration and reduces out-migration at the municipal level, particularly of unskilled workers.

Types of workers (wage income): Average wage increases in subdistricts more exposed to the trade shock were substantially higher for men than for women, five times greater for high-skilled workers than low-skilled workers, and twice as high for experienced workers than for younger workers. Types of workers (informality): Women seem to benefit more than men in terms of informality reduction related to trade effects, 1.5 percent versus 0.7 percent.

Labor income: Between 1996 and 2011, a 10 percent reduction in employment-weighted tariffs led to a fall in income per capita of 1.4 percent outside the former homelands and a 3.7 percent reduction in income per capita in municipalities that included at least one former homeland. Reduction in tariffs lead to those living in former homelands to experience slower growth in employment and income per capita than those living in the rest of the country.

Brazil Development of a new tractable framework to quantify the impacts of trade shocks on labor mobility and the welfare of workers including the number of job opportunities Labor income: Higher exports boost employment and wages. A 10 percent increase in exports leads to a 2.3 percent increase in employment and a 3.1 percent increase in average wages. Higher exports also increase the number of jobs on average and increase the number of workers in formal employment. The magnitude of gains depends on a worker’s industry as well as the region. The average increase in wages, for example, would be about 5 percent for manufacturing workers and more than 6 percent for manufacturing workers in regions with significant export concentration. The average real wage increase for agriculture workers would be about 3.75 percent, significantly smaller than that for most manufacturing workers. (Table continues on the following page.)

TABLE ES.1 Case Studies Show Different Political and Economic Dynamics in Trade Reforms (continued)

Case study

Knowledge gap study seeks to fill In-country results (labor income and consumption)

Distributional impact (differences across sectors, regions, types of workers)

Sri Lanka Expansion of ex ante evidence on regional impacts on consumption and income in the medium to long term Welfare: With lower trade barriers between Sri Lanka and its key trading partners, economic impacts would differ geographically as well as temporally. There would be less poverty but greater wage inequality and higher economic activity in urban areas than in rural areas. Lower trade costs are likely to boost growth and output of sectors that employ a larger proportion of skilled workers (trade and transport, social services, and finance). As a result, wages of skilled workers grow faster than those of nonskilled workers, resulting (in the absence of policy intervention) in higher inequality. Most employment gains are projected in the western regions of Colombo, Gampaha, and Kalutara, where urbanization is highest.