The long and short of it: global liberalization and the incomes of the poor

Abstract

The incomes of the poor may have been hurt because of adjustment costs or low-wage competition following trade deregulation and because of increased macroeconomic volatility following capital account liberalization. Greater trade volumes that disproportionately benefit low-income households in the short run, though, may offset these adverse effects. Using data from the World Bank, the IMF, and the UN, we find that capital and current account deregulation hurts the poor in the short run, and that trade offsets some of these adverse effects. Further, trade and openness have no significant impact on longrun growth, which could have offset adverse short-run effects.

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