Income Distribution, International Integration and Sustained Poverty Reduction
What is the pathway to development in a world with less international integration? This paper answers this question within a model that emphasizes the role of demand-side constraints on national development, which is identified with sustained pover...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2020
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/401431596034978357/Income-Distribution-International-Integration-and-Sustained-Poverty-Reduction http://hdl.handle.net/10986/34260 |
| Summary: | What is the pathway to development in a
world with less international integration? This paper
answers this question within a model that emphasizes the
role of demand-side constraints on national development,
which is identified with sustained poverty reduction. In
this framework, development is linked to the adoption of an
increasing returns to scale technology by imperfectly
competitive firms that need to pay the fixed setup cost of
switching to that technology. Sustained poverty reduction is
measured as a continuous decline in the share of the
population living below $1.90/day purchasing power parity in
2011 US dollars over a five year period. This outcome is
affected in a statistically significant and economically
meaningful way by domestic market size, which is measured as
function of the income distribution, and international
market size, which is measured as a function of
legally-binding provisions to international trade
agreements, including the General Agreement on Tariffs and
Trade, the World Trade Organization and 279 preferential
trade agreements. Counterfactual estimates suggest that, in
the absence of international integration, the average
resident of a low or lower-middle income country does not
live in a market large enough to experience sustained
poverty reduction. |
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