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pdf Traded sector employment and vulnerability

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trade_pauw&etal.pdf

Kalie Pauw, Murray Leibbrandt, Lawrence Edwards & Sten Dieden (2006)

McCulloch et al. (2001) identify three potential pathways through which the poor are affected by trade liberalisation. The first, the price transmission mechanism, requires an understanding of how changes in border prices get translated into changes in prices faced by (poor) households. The second pathway is via the impact on enterprise profits, employment levels and wages. The third pathway considers changes in government revenue and the impact on its spending capacity.

Although poor households in South Africa rely heavily on government support in the form of pensions and other benefits, tariff revenue does not constitute an important source of revenue to government, and hence the third pathway is not of great importance. The first pathway requires explicit attention in its own right and has been tackled in Daniels and Edwards (2006).

This study revolves around issues pertaining to the second pathway with the focus on links between trade, employment and earnings and poor households. We assess the potential impact from international trade liberalisation on importcompeting and exporting industries in terms of employment generation or destruction and then connect these employment changes to the poor.

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