Exporting out of poverty: Provincial poverty in Vietnam and U.S. market access

• Published in: Journal of international economics 2011-09, Vol.85 (1), p.102-113
• Main Author: McCaig, Brian
• Format: Article
• Language: English
• Subjects: Export composition; Export demand; Export expansion; Foreign market access; Foreign trade; Labor economics; Labor force; Market access; Poverty; Studies; Tariffs; Trade agreements; Trade liberalization; Trade liberalization Foreign market access Poverty Vietnam; Trends; U.S.A; Vietnam
• ISSN: 0022-1996; 1873-0353
• DOI: 10.1016/j.jinteco.2011.05.007

Can a developing country reduce poverty by gaining increased market access to a large, rich country? The 2001 U.S.–Vietnam Bilateral Trade Agreement (BTA) provides an excellent opportunity to examine this question as, unlike other bilateral trade agreements, the U.S. tariff cuts were not influenced by Vietnamese industries. Using variation in the structure of the labor force across provinces prior to the trade agreement, I construct provincial measures of U.S. tariffs. To address concerns over confounding trends between changes in provincial poverty and changes in provincial tariffs I follow two approaches: controlling for trends based on observable initial conditions and differencing away time invariant trends using pre-BTA data. I find that provinces that were more exposed to the U.S. tariff cuts experienced faster decreases in poverty between 2002 and 2004. Additionally, I document that the movement of workers across provinces is limited in scale, particularly for those with low levels of education. Finally, I show that the most exposed provinces experienced faster wage growth for workers with low levels of education, but not for highly educated workers. ► I analyse the impacts of increased U.S. market access on poverty in Vietnam. ► The 2001 U.S.-Vietnam Bilateral Trade Agreement dramatically reduced U.S. tariffs. ► I examine differential impacts across Vietnamese provinces to the tariff cuts. ► Exposure is based on the structure of the workforce prior to the trade agreement. ► Poverty fell faster in provinces that experienced the largest U.S. tariff cuts.