Are Export Promotion and Trade Liberalisation Good for Latin America's Poor?

ABSTRACT

This article reports on a project for 16 Latin American countries, primarily carried out by in-country teams, that used country-specific but relatively standard CGE models linked to household microsimulation models to assess the impact of trade liberalisation, exchange-rate manipulation, capital inflows, and terms-of-trade changes on output, employment and poverty. The results indicate that, almost everywhere, liberalization increased output, reduced poverty, and had positive effects on employment or wages. Rising skilled-unskilled wage gaps in some countries led to increased income inequality. In most countries, alternative liberalization scenarios had similar positive effects. Skill differentials, however, rise in some countries and fall in others, depending on the export structure. Finally, capital inflows were expansionary and reduced poverty.