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NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Asha Sundaram

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September 2010Trade, Poverty and the Lagging Regions of South Asia
with Pravin Krishna, Devashish Mitra: w16322
This chapter studies the differential effects that trade openness may have on leading and lagging regions within a country. Examining data from India, we find that while trade liberalization is associated with reduced poverty, this effect is smaller in lagging states. The expected transmission of international prices to domestic prices with openness to trade is seen to be less perfect in lagging states than in leading ones, especially in the rural sector. This suggests that poverty reduction in lagging regions is impeded by the lack of exposure to international markets as opposed to another commonly argued factor – the competition to domestic production from international trade. Cross-country analysis with a sample of countries in South Asia (Bangladesh, India, Nepal, Pakistan and Sri Lank...

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