An Analysis of Trade Effects on World Poverty

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Economics | Social and Behavioral Sciences


Daniel Finn, Economics


This study addresses the ethics and economics of the link between international trade and poverty. With regard to the ethics, this paper exposes the flawed moral argument made by many in the developed world: trade between developed and developing nations harms the poor in developed nations, thus it ought to be stopped. This argument is flawed in one crucial way – it fails to take into account the effect trade has on the poor in the developing nation. This study proposes we abandon this nationalistic view and adopt a global perspective on the issue of trade and poverty. Consistent with this global approach, this study examines the net effect of trade on the world’s poor. This study shows that in theory international trade provides a net benefit for the world’s poor through an increase in their real wages. This theory is supported by empirical evidence from Mexico and the United States after the North American Free Trade Agreement.