University of Sussex
Montalbano, Pierluigi.pdf (1.66 MB)

Essays on trade openness and vulnerability to poverty

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posted on 2023-06-09, 04:30 authored by Pierluigi Montalbano
This thesis focuses on the welfare costs of exposure to risk linked to openness to international trade. This is a prominent issue in international debate, whereas it is largely ignored by trade literature, both theoretical and empirical. Trade theory is mainly focused on the first moment of the above relationship, which is actually insufficient for welfare purposes when people are risk averse. Empirical evidence is mixed, scattered in separate fields of analysis, and does not reach a common stance. As a result, current literature fails to make a full assessment of the net welfare impact of an opening-up process. This work contributes to the above debate by proposing: • A comprehensive review of the literature on the “destabilising effects” of openness to international trade; • An empirical test on the significance and relevance of “precautionary saving” behaviour under risk, estimated from cross-country data; • A conceptualisation of vulnerability to poverty induced by trade openness; • A comprehensive analysis of vulnerability to poverty induced by trade liberalisation in Vietnam under Doi Moi,¹ by exploiting the available household living standard surveys for the period 1992-2008; • An extended version of Ligon and Schechter’s (2003) measure of Vulnerability as low Expected Utility; • An empirical application of the adjusted VEU measure to “trade-induced vulnerability” using VHLSS panel data (2002-06) The work is divided into four essays as follows: 1. Review of the literature and conceptualisation (and misconceptions) of “trade induced vulnerability to poverty” (Essay 1); 2. A cross-country empirical test in the long-run behaviour of consumption under risk (Essay 2); 3. A cross-sectional empirical test of trade-induced vulnerability in Vietnam under Doi Moi (period 1992-2008) (Essay 3); 4. A panel empirical test of trade-induced vulnerability in Vietnam in the period 2002-06 (Essay 4). ¹“Doi Moi” (renovation) was a comprehensive process of reforms undertaken from the early 1990s by Vietnam characterised by a combination of liberalisation, stabilisation and structural reforms.


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