underdeveloped evidence base documenting the local distributional impacts of exports. And the study on Sri Lanka aims to unpack the potential impacts of broad trade policy reforms on employment at the subnational level. A variety of data and models have been applied to answer these questions (appendix A). Overall, we find that there are very different political and economic dynamics in the five countries, including sector-specific export shocks in Bangladesh, low mobility by historically disadvantaged groups in South Africa, high mobility costs in Brazil, and greater return migration and weak economic linkages in Mexico. All these insights can help policy makers craft policies to help avoid or mitigate some of the negative impacts from trade reforms ex ante and distribute gains from trade more broadly.
Mexico: How Rising Exports Affect Local Poverty and Inequality Mexico joined the General Agreement on Tariffs and Trade (GATT) in 1986 and NAFTA in 1994, which led to substantial tariff reductions both globally and regionally, greater export orientation, and the country’s diversification away from oil. Exports of goods and services shot up from US$96.7 million in 1990 to US$480 billion in 2018, from 18.7 percent of gross domestic product (GDP) to 39.2 percent. Moreover, since 2004, most of its exports (70 to 80 percent) have gone to the United States. Mexico has nonetheless underperformed in terms of growth, inclusion, and poverty reduction compared to its peers (World Bank 2019). Between 2004 and 2014 (the period covered by this study), poverty in Mexico declined by 4 percentage points, (from 37.6 to 33.6 percent), while it declined by nearly 17 percentage points, from 41.3 to 24.4 percent (US$5.50 per day per capita poverty line, 2011 purchasing power parity) in Latin America and the Caribbean. Almost half of the decline in poverty in Mexico is explained by redistribution (partially due to the shift from general subsidies to targeted and conditional transfers) rather than by economic growth, despite the expansion in trade over the period. In Latin America, by contrast, redistribution explains only about 20 percent of the decline, whereas economic growth accounted for nearly 80 percent of the reduction in poverty, driven in part by the commodity boom that started in 2003 and lasted until 2014. These poverty declines were relatively small compared to those of other countries typically mentioned as examples of successful export-led growth. Vietnam, whose export-to-GDP ratio increased from 54.7 to 70.3 percent between 2002 and 2008, experienced a substantial reduction in poverty: the share of people living on less than US$3.20 a day declined from about 70.8 to 46.8 percent. Why did increasing exports not translate into lower poverty and higher income growth in Mexico? “Tracing the Local Impacts of Exports on Poverty and Inequality in Mexico” by Rodríguez-Castelán, Vazquez, and Winkler (2020) offers insight on this
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The Distributional Impacts of Trade
