Trade Liberalisation and Poverty : A Case Study on Ukraine

Abstract: The Washington consensus reform package for developing countries initiated in the early 90’s, came to be a leading paradigm in the international community. One of the principle ideas, that trade liberalisation would alleviate people from poverty, has been pursued by many policy makers dealing with developing countries. This thesis estimates the effects on poverty induced by trade via three channels – economic growth, prices and employment & wages. As trade liberalisation implies distributional effects on the economy and general validity on how this effects poor has not been possible to establish - we have conducted a  qualitative case study in order to accumulate to the available research and reach understanding of the phenomena. Ukraine has been selected as case due to its recent trade liberalisations and proximity to attractive trade partners. With poverty as a focal point, the trade liberalisation and the international trade in Ukraine is examined together with a wide range of macro variables in order to trace down the effects trade has had on poverty. The result show that a factual trade liberalisation has occurred, both in terms of policy change and trade output, and that large productivity gains has been achieved. Although difficult to determine, increased competition and new technology plays a significant part in the increased productivity which most probably has been due partly to the increased trade. These productivity gains have expressed themselves as increased dynamics in the labour market - boosting real wages, and with it reducing a great share of poverty in Ukraine.