Ana Caroline Biscaia
Rubana Mahjabeen
ECON 430
Nov 15, 2016
Trade and Poverty in the Poor Countries – Evidences
The article by Jagdish Bhagwati and T.N. Srinivasan state arguments about openness of
trade and its economic benefits. They support the argument that trade promoted growth
and growth reduces poverty. According to the article, the best evidence is to be found in
the detailed country studies pioneered by the OECD and the National Bureau of
Economics Research project. Although, the cross-country regressions produces mixed
evidences in both directions: benign and malign. The article closes the arguments
presenting evidences that practically no country that has been closed to autarkic has
managed to sustain a high growth performance over a sustained period. The evidence on
growth and poverty is best approached through focus on the situation of two countries:
India and China. Both country’s has its majority of poor living on the rural areas, and both
achieved significant reduction in poverty during 1980-2000 during their fast growth.
China’s real GDP grew at an average of 10% per year, no other country in the world
achieved such growth rate. India’s case of real GDP growth of 6% per year was also
incredible, fewer than 10 countries in the world achieved similar growth. By using the
“Bhagwati hypothesis” by immiserizing growth, the effect on reduction in poverty in both
countries was enormous. Another evidence is that according to the Asian Development
Bank estimates, the incidence of poverty in China declined by 28% in 1978 to 9% in 1998.
