When Does Trade Hurt? Market, Transition and Developing Economies

29 Pages Posted: 13 Jun 2002 Last revised: 30 Jan 2021

See all articles by Kala Krishna

Kala Krishna

Pennsylvania State University - Department of Economics; National Bureau of Economic Research (NBER)

Cemile Sahin

affiliation not provided to SSRN

Date Written: June 2002

Abstract

This paper argues that labor market distortions in transition and developing economies help explain differential impacts of trade liberalization. We assume that workers differ in ability. In a market economy their earnings depend on their ability. However, earnings are independent of ability due to a common wage set in manufacturing in a transition economy and because of family farms in a developing economy. Our work suggests that trade liberalization without structural reform can have serious adverse effects in transition and developing economies: there can even be mutual losses from trade.

Suggested Citation

Krishna, Kala and Sahin, Cemile, When Does Trade Hurt? Market, Transition and Developing Economies (June 2002). NBER Working Paper No. w8995, Available at SSRN: https://ssrn.com/abstract=315992

Kala Krishna (Contact Author)

Pennsylvania State University - Department of Economics ( email )

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Cemile Sahin

affiliation not provided to SSRN

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