Trade Liberalization and the Structure of Poverty in Developing Countries By

“Globalization increases poverty ” is a common assertion made by critics of globalization. The proliferation of low-wage jobs and higher food prices are some of the arguments brought forward in support of this argument. One of the hallmarks of globalization is the systematic dismantling of barriers to trade. Advocates of trade liberalization – particularly industrialized country agriculture reform – argue that the ensuing rise in world prices for agriculture products will boost rural incomes, thereby reducing poverty in the poorest countries, where the bulk of world poverty resides. Who is right? The goal of this paper is take a systematic look at the structure of poverty across a range of developing countries in Africa, Asia and Latin America, and explore how national poverty rates in some of the poorest countries in the world are likely to be affected by global trade liberalization. Our analysis of the structure of poverty is based on national household surveys from 14 developing countries. While we consider both spending and earnings effects of trade liberalization, it is argued that the earnings effects will generally be the dominant factor. This is particularly true in the short run for households that are highly specialized in their earning