Truck and Barter

NBER has a major new book coming up of which Sebastian Mallaby says;

“A formidable team of economists directed by Berkeley's Ann Harrison is about to come out with a volume titled "Globalization and Poverty"; a central message is that free trade works best for countries with labor mobility. For example, India's dramatic trade liberalization in the 1990s produced equally dramatic strides against poverty. But because Indian workers move surprisingly little between industries and regions, people in sectors that contracted as a result of the lifting of tariffs were trapped. Liberals who seek to "soften" trade deals by writing mobility-restricting labor regulations into them need to rethink their strategy.”

The main findings of the book are summarized below;

- The first conclusion of this essay is that such a simple interpretation of general equilibrium trade models is likely to be misleading.

- Second, the evidence suggests that the poor are more likely to share in the gains from globalization when there are complementary policies in place. Such complementary policies include investments in human capital and infrastructure, as well as policies to promote credit and technical assistance to farmers, and policies to promote macroeconomic stability.

- Third, trade and foreign investment reforms have produced benefits for the poor in exporting sectors and sectors that receive foreign investment.

- Fourth, financial crises are very costly to the poor.

- Finally, the collected evidence suggests that globalization produces both winners and losers among the poor. The fact that some poor individuals are made worse off by trade or financial integration underscores the need for carefully targeted safety nets.