In the past 10 years, the increased availability of microdata and computing power have spawned a burgeoning literature measuring these distributional impacts of trade,<sup>152</sup> yielding several novel insights:

- **The negative distributional impacts of international trade are large, localized, and long‐lived.** The emergence of China as a great economic power and its integration into the global trading system have caused regions in both developed and developing countries with a high concentration of import competing industries to fall behind other regions. Workers who are adversely affected by trade liberalization face high moving costs and are often not able to leave to find better jobs in other regions. The adverse effects of trade liberalization are consequently concentrated in particular regions, while the benefits are widespread throughout the whole economy.<sup>153</sup> These negative localized effects persist in the long run, and the affected regions take a long time to recover, if at all.<sup>154</sup> Since workers’ regions seem as important as their industries and occupations in determining the distributional impacts of globalization, it is crucial to switch from industry‐based social protection policies to more flexible and possibly region‐based policies.<sup>155</sup>

- **Trade liberalization can favor the poor because low‐income households often consume traded goods more than services and non‐traded goods** .<sup>156</sup> The consumption gains resulting from lower prices tend to be widely distributed (as most people consume many different products), but job losses in import‐competing sectors tend to be highly concentrated (as most people usually only have one job – which if lost to import competition is a major shock).<sup>157</sup>

- **Lower prices due to trade liberalization are often not fully passed on to consumers.** Evidence from Ethiopia and Nigeria suggests that intermediaries capture most of the surplus from lowering international trade barriers.<sup>158</sup> Similarly, firms in India increased their markups after trade was liberalized, thereby offsetting some of the gains for consumers.<sup>159</sup>

Harnessing the potential of globalization to reduce poverty and boost growth requires complementary social protection and investment policies that address market imperfections and compensate losers. These include reducing intranational trade costs in developing countries by investing in infrastructure, connectivity and market access, and setting up flexible social protection systems. Better infrastructure allows domestic and export market access for poor households, thereby facilitating structural transformation from subsistence farming to cash crops. Improved connectivity and platforms allow small enterprises, which tend to employ more low‐skill and informal workers than large firms, to compete in global markets. Flexible social protection and investment schemes can help protect workers and

> 152 <mark>Goldberg, Penny and Nina Pavcnik (2016). “The Effects of Trade Policy,” in Bob Staiger and Kyle Bagwell (eds), The Handbook of Commercial Policy, Volume 1A, Elsevier, pp. 161‐20.</mark>

> 153 <mark>Autor, David, David Dorn, and Gordon H. Hanson (2016). “The China Shock: Learning from Labor‐Market Adjustment to Large Changes in Trade,”</mark> _<mark>Annual Review of Economics</mark>_ <mark>, 8(1).</mark>

> 154 <mark>Dix‐Carneiro, Rafael, and Brian Kovak (2017). “Trade Liberalization and Regional Dynamics,”</mark> _<mark>American Economic Review</mark>_ <mark>, 107 (10).</mark>

> 155 <mark>Artuc, Erhan, Paulo Bastos, and Eunhee Lee (2019). “Trade, Jobs and Worker Welfare,” Mimeo: World Bank.</mark>

> 156 <mark>Fajgelbaum, Pablo, and Amit Khandelwal (2016). “Measuring the Unequal Gains from Trade,”</mark> _<mark>The Quarterly Journal of Economics</mark>_ <mark>, 131 (3).</mark>

> 157 <mark>Artuc, Erhan, Guido Porto, and Bob Rijkers (2019). “Trading off the Income Gains and the Inequality Costs of Trade Policy,”</mark> _<mark>Journal of International Economics</mark>_ <mark>, 120.</mark>

> 158 Atkin, David and Dave Donaldson (2015). <mark>“Who's Getting Globalized? The Size and Implications of Intranational Trade Costs,” NBER Working Paper No. 21439.</mark>

> 159 De Loecker, Jan, Pinelopi Goldberg, Amit Khandelwal, and Nina Pavcnik (2016). “Prices, Markups and Trade Reform,” _Econometrica_ , 84 (2).

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