TRADE LIBERALISATION, DEINDUSTRIALIZATION AND INEQUALITY: The cases of South Africa and Brazil, 1970-2010

TIAGO PORTO; CLARA DALLAIRE-FORTIER; LEILA MUCARSEL

Conferencia; EPOG MASTERS CONFERENCE; 2018

As many developing countries in the last decades of the XXth century, Brazil and South Africa went through a phase of trade liberalisation, deindustrialization and increase in inequality. These can be situated in the time period following the Washington Consensus and influenced by the domination of neoclassical theories. Alternative theories and explanations for those phenomena were g¬¬¬iven in the last decades to explain these phases. For instance, regarding the causes of deindustrialization, Rowthorn (1997), Rodrik (2015), Palma (2005,2008) and Tregenna (2009) end up with very different conclusions. The causes of inequality are also the object of debate with, for example, the different weight given to the opening of international trade (trade liberalisation) or/and technology improvement on the rise of inequality. This research in inspired by a 2013 paper by Bogliaccini that explores the relationship among trade liberalisation, deindustrialization, and income inequality in the more industrially advanced Latin American countries. He analyzes the relationship of trade liberalisation, deindustrialization and inequality in Latin American countries from 1980 to 2000. He concludes that there is a causal link between trade liberalisation and inequality, which alike deindustrialization reduce the share of manufacturing employment in the economy. Therefore, trade liberalisation has a clear effect on inequality by fostering deindustrialization in Latin America.The author tests his hypothesis showing that trade reform toward liberalisation led to decline in the manufacturing sector and is detrimental to equality through the ?destruction of formal employment? (Bogliaccini, 2013:79). Moreover, he argues that the availability of new and improved data on income inequality (World Institute for Development Economics Research 2008) allows the use of time series to tackle two puzzles. First is the effect of trade reform on formal industrial employment. Second is the effect of formal employment shrinkage on inequality as trade reform advanced (Bogliaccini, 2013:2).In order to contribute to this debate, the project will build on Bogliaccini?s work aiming to explore the relationship between trade liberalisation, deindustrialization and income inequality in Brazil and South Africa. Being these two countries the most unequal countries in the world, and representing two major economies in South America and Africa respectively, the study of these cases can shed light on the debate on the impact of deindustrialization.