Berloffa, Gabriella and Segnana, Maria Luigia (2004) Trade, Inequality and Pro-Poor Growth: Two Perspectives, One Message? UNSPECIFIED. (Unpublished)
This paper concentrates on results drawn from two strands in the literature. The first focuses on trade as a growth-enhancing policy and its impact on poverty and inequalities. The second strand focuses on the impact of initial inequality on growth (through different micro channels), and on the resulting effects on poverty and inequalities. These two strands are merged and examined from two different perspectives: that of enhancing economic growth and that of reducing poverty. Analysis of the results shows that there is no general evidence in favour of the views that trade liberalisation "is good for growth" and that "growth is good for the poor". More precisely, the theoretical debate concerning the effects of trade on growth, and the endless discussions on its empirics, is further deepened if we consider that trade may worsen within-countries inequality, and that this may be harmful for future growth. Furthermore, the response of poverty to a given growth depends both on the structure of growth and on some specific conditions of each single country. By combining the results from these two perspectives, we draw a number of conclusions. First, initial as well as trade-induced inequalities matter for the sustainability of growth processes. Second, specific conditions (sectoral composition, wealth and land distribution, distribution of schooling, convexity of earning profiles, specialisation of income sources, etc.) can explain why the same policies may have very different distributional effects at sectoral and individual levels. Thus, the problem of poverty reduction cannot be separated from the context in which e.g. trade is liberalised. Third, these specific country conditions play a crucial role in explaining why, at the macro level, similar growth rates may have such different impacts on poverty and why the same policies may have different effects on growth performance. Hence, the problem of poverty reduction cannot be separated from the way in which growth is achieved.
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