Poverty impacts of agricultural trade liberalisation in Sri Lanka: A review of the literature

Abstract

Any policy reform will bring positive impacts as well as adverse impacts to the society, depending on the economy and on the characteristics of the population group. The impacts of trade liberalisation, particularly the impact of trade policies in developed countries and inequality in developing economies, is strongly debated in the international trade and development arena. Objective of this paper is to present a comprehensive review of the theoretical and empirical literature on the effect of agricultural trade liberalisation on poverty, in particular, focusing in Sri Lanka. Methods used for analysing the complex poverty impacts of trade liberalisation include partial equilibrium models, econometric analysis, general equilibrium models, and micro/macro simulation models, which combine macro-level simulation with micro-level household models. Agricultural trade liberalisation in particular tends to adversely affect small farmers in developing countries while large scale farmers/producers and the farmers from developed countries gain through agricultural trade liberalisation. Therefore, agricultural trade liberalisation tends to supports consumers while adversely affecting rural producers. However, country-specific studies are needed to explore the outcomes for particular groups in particular countries. Each and every policy reform will bring positive impact as well as adverse impact to society, depending on the economy and on the characteristics of the population group.