NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Who Gains from Trade Reform? Some Remaining Puzzles

Ann Harrison, Gordon Hanson

NBER Working Paper No. 6915
Issued in January 1999
NBER Program(s):   ITI

This paper focuses on three unresolved issues with regard to the impact of trade reform. First, many studies linking trade reform to long run growth are surprisingly fragile. To illustrate the problems with this literature, we examine a popular measure of openness recently introduced by Sachs and Warner (1995). We show that their measure fails to establish a robust link between more open trade policies and long run growth. The second puzzle we identify is the small impact of trade reform on employment in developing countries. Finally, we analyze evidence on the relationship between trade reform and rising wage inequality, focusing on the 1985 Mexican trade reform. Wage inequality in Mexico rose after the reform, which is puzzling in a Heckscher-Ohlin context if Mexico has a comparative advantage in producing low skill-intensive goods.

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Document Object Identifier (DOI): 10.3386/w6915

Published: Journal of Development Economics, Vol. 51 (1999): 315-324.

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