Trade Adjustment Costs in Developing Countries

399 Pages·2010·3.28 MB·English

This book summarizes the state of knowledge in the economic literature on T
trade and development regarding the costs of adjustment to trade openness ra THE WORLD BANK
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and how adjustment takes place in developing countries. The contributions e

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by leading experts look at: d
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t Trade Adjustment Costs
• the magnitude of trade adjustment costs in the presence of frictions m
in factor markets; e
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• the impacts of trade shocks and greater trade openness;
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• the factors that affect the way trade, especially exports, adjust; o
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• trade adjustment assistance programs in the U.S. and compensation ts

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schemes for farmers in the EU. n
D Impacts, Determinants and
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The book will be relevant to academics, students, policy-makers and trade ve
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practitioners alike. o
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“Too often, policymakers avoid more open trade because they fear the
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adjustment costs, while proponents of such open trade overlook or dismiss o
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them. This comprehensive set of papers takes these costs seriously and helps n
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us appreciate where both sides go wrong. It provides an extremely useful ri
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survey of what we know and what we still need to know if the benefits from s
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trade are to be more widespread within developing countries” Im
Robert Lawrence, Albert L Williams Professor of International Trade Harvard p
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Kennedy School. t
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“Trade expansion generates huge potential gains to developing countries, e
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but it may also produce pains to specific socio-economic groups. This volume r
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by world-renowned trade and labour experts offers the first comprehensive i
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assessment of how trade adjustment takes place in developing countries, a
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what its costs are and how policy can help mitigate them. As such it is an t
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important and timely contribution to the debate on the costs and benefits a
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of globalisation for developing countries.” d

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Andre Sapir, Professor of Economics, Solvay Brussels School of Economics and o
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Management, and former Economic Advisor to the President of the European ic
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Commission.
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edited by:
Guido Porto and Bernard M. Hoekman
THE WORLD BANK
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TRADE ADJUSTMENT COSTS IN DEVELOPING COUNTRIES:
IMPACTS, DETERMINANTS AND POLICY RESPONSES
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Trade Adjustment Costs in Developing Countries: Impacts, Determinants
and Policy Responses
Copyright ©2010 by
The International Bank for Reconstruction and Development/The World Bank
1818 H Street, NW, Washington, DC 20433, USA
ISBN: 978-1-907142-08-6
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Centre for Economic Policy Research
The Centre for Economic Policy Research is a network of over 700 Research Fellows
and Affiliates, based primarily in European universities. The Centre coordinates the
research activities of its Fellows and Affiliates and communicates the results to the
public and private sectors. CEPR is an entrepreneur, developing research initiatives
with the producers, consumers and sponsors of research. Established in 1983, CEPR
is a European economics research organization with uniquely wide-ranging scope
and activities.
The Centre is pluralist and non-partisan, bringing economic research to bear on
the analysis of medium- and long-run policy questions. CEPR research may
include views on policy, but the Executive Committee of the Centre does not give
prior review to its publications, and the Centre takes no institutional policy
positions. The opinions expressed in this report are those of the authors and not
those of the Centre for Economic Policy Research.
CEPR is a registered charity (No. 287287) and a company limited by guarantee
and registered in England (No. 1727026).
Chair of the Board Guillermo de la Dehesa
President Richard Portes
Chief Executive Officer Stephen Yeo
Research Director Mathias Dewatripont
Policy Director Richard Baldwin
The World Bank
The World Bank Group is a major source of financial and technical assistance to
developing countries around the world, providing low-interest loans, interest-free
credits and grants for investments and projects in areas such as education, health,
public administration, infrastructure, trade, financial and private sector development,
agriculture, and environmental and natural resource management. Established
in 1944 and headquartered in Washington, D.C., the Group has over 100 offices
worldwide. The World Bank’s mission is to fight poverty with passion and
professionalism for lasting results and to help people help themselves and their
environment by providing resources, sharing knowledge, building capacity and
forging partnerships in the public and private sectors.
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Trade Adjustment Costs
in Developing Countries:
Impacts, Determinants
and Policy Responses
Edited by:
GUIDO PORTO
AND BERNARD M. HOEKMAN
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ATT_prelims_ppi_xvi:Layout 1 11/6/10 09:49 Page vii
Contents
List of Tables x
List of Figures xii
Preface xv
1. Trade Adjustment Costs in Developing Countries: Impacts, 1
Determinants and Policy Responses
PART A. ADJUSTMENT COSTS
2. Modeling, Measuring, and Compensating the Adjustment Costs 25
Associated with Trade Reforms
Carl Davidson and Steven Matusz
3. A Structural Empirical Approach to Trade Shocks and Labor 37
Adjustment: An Application to Turkey
Erhan Artuç and John McLaren
4. Reallocation and Adjustment in the Manufacturing Sector 59
in Uruguay
Carlos Casacuberta and Néstor Gandelman
5. Trade Reforms in Natural-Resource-Abundant Economies 71
Jaime de Melo
6. Barriers to Exit from Subsistence Agriculture 89
Olivier Cadot, Laure Dutoit and Marcelo Olarreaga
PART B. ADJUSTMENT IMPACTS
7. Trade Reform, Employment Allocation and Worker Flows 103
Marc-Andreas Muendler
8. Adjustment to Trade Policy in Developing Countries 143
Gordon H. Hanson
9. Production Offshoring and Labor Markets: Recent Evidence 155
and a Research Agenda
Margaret S. McMillan
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viii Contents
10. Trade Adjustment and Labor Income Risk 171
Pravin Krishna and Mine Zeynep Senses
11. Trade, Child Labor, and Schooling in Poor Countries 179
Eric V. Edmonds
12. Adjustment to Internal Migration 197
Gordon H. Hanson
13. Exporter Adjustment to the End of Trade Preferences: 215
Evidence from the Abrupt End of Textile and Apparel Quotas
James Harrigan
14. New Kids on the Block: Adjustment of Indigenous Producers 223
to FDI Inflows
Beata S. Javorcik
15. Adjustment to Foreign Changes in Trade Policy Under the 237
WTO System
Chad P. Bown
PART C. FACTORS THAT AFFECT TRADE
16. Transportation Costs and Adjustments to Trade 255
David Hummels
17. The Duration of Trade Relationships 265
Tibor Besedeš and Thomas J. Prusa
18. Openness and Export Dynamics: New Research Directions 283
James Tybout
19. Market Penetration Cost and International Trade 193
Costas Arkolakis and Olga Timoshenko
20. Taking Advantage of Trade: The role of Distortions 303
Kala Krishna
21. Credit Constraints and the Adjustment to Trade Reform 315
Kalina Manova
22. Standards, Trade and Developing Countries 331
Johan F M Swinnen and Miet Maertens
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PART D. ADJUSTMENT PROGRAMS
23. Notes on American Adjustment Policies for Global-integration 345
Pressures
J David Richardson
24. Compensation Payments in EU Agriculture 361
Johan F M Swinnen and Kristine Van Herck