Date

2015

Department or Program

Economics

Primary Wellesley Thesis Advisor

Pinar Keskin

Additional Advisor(s)

Ama Baafra Abeberese

Additional Advisor

Robin McKnight

Abstract

Does free and fair trade benefit the workers in an industry? My thesis investigates this question in the context of the Multifiber Arrangement, a system of quotas established in 1974 to protect the textile industries in developed countries by restricting cheaper imports from developing countries. Lifting of these quotas mandated by the WTO between 1995 and 2005, therefore, meant opportunities for greater textile production in internationally competitive developing economies such as India, where the textile industry accounts for over 5.2% of global production and is the second largest generator of employment after agriculture. In labor-intensive industries, an increase in production should further mean more employment, and possibly higher wages and improved livelihood. Using variation in the pre-agreement industry mix across states in India, my results suggest that textile and clothing production and employment grew as the MFA quotas were lifted, and that larger textile-producing states pre-reform saw a greater increase in output and employment than smaller producers. I also find that larger producers of textiles experienced a greater decline in absolute poverty, but a differential rise in inequality; benefits to the quota removal seem to be going to the owners of big textiles businesses, and not workers.

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