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Economic Literature on South Asia


Sarath Rajapatirana

TRADE LIBERALIZATION AND POVERTY IN SOUTH ASIA
Edited by Jayatilleke S. Bandara Premachandra Athukorala, and Saman Kelegama
Routledge, London, 2011, pp. 195, 00.00

VOLUME XXXVI NUMBER 3 March 2012

This compendium of essays edited by three distinguished Sri Lankan economists is a welcome addition to the economic literature on South Asia. The subject matter is of great import to policy makers and academics alike and poses a considerable challenge to both the editors and the individual authors. It is a highly competent study with contributions from authors mostly from their own countries. No country can hope to reach higher levels of growth by neglecting its foreign trade or not sustaining trade reform once it is initiated. Equally, it is not a magic bullet but only one tool in the arsenal of policy-makers to raise the rate of economic development and reduce poverty. The study covers the seven South Asian countries: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka. It stretches over four decades starting with the earliest episode of Sri Lanka and the later effort of Maldives and Bhutan. The main trade reform efforts are concentrated in the two decades of the 1980s and 1990s. The study has nine chapters. 'Trade Liberalization and Poverty in South Asia: Reforms, Stylized Facts and Preview' provides both an introduction and a crisp summary of the whole study by the three editors. 'Trade and Poverty, Theory Evidence and Policy Issues' by Jayatilleke S. Bandara provides a tour de force of the issue confronting the analysis of the nexus between trade and poverty and an impressive survey of different methodologies ranging from cross-country regressions to computable general equilibrium models, to partial equilibrium and cost of living analysis. It arrives at a number of inferences and notes the difficulties of establishing an empirical link between trade and poverty, depending as it does on special structural characteristics of the country in question, and the ambiguity of the results of empirical work that range from positive links to negative ones. The remaining seven chapters deal with the country cases. The chapter on Bangladesh by Selim Raihan provides an overview of the path of progress in trade liberalization in the country. The important phase of liberalization was supported by a structural adjustment programme of the World Bank and an enhanced structural adjustment facility by the IMF. The path followed is the now familiar pattern in most countries, moving from a highly restricted import regime based on quantitative restrictions to replacing them with tariffs, and reducing tariffs and their variance over time. Between 1991-2 and 2004-5, the un-weighted ...


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