# **1. Introduction**

Globalization is under fire. Public perceptions and recent policy debates increasingly appear to indicate that trade liberalization has been accompanied by rising income inequality in developed and developing economies. The fact that trade liberalization creates both winners and losers has never been in question. Therefore, while international trade enhances economic growth in the aggregate, the distribution of its benefits may vary by income group, industry of occupation, location and/or social group.

The literature on the subject discusses why poor households may have only marginally benefitted from trade opening, both as producers and consumers. On the production side, skilled-biased technological change associated with trade and FDI is likely to have dampened the increase in the demand for unskilled labor in developing economies expected after trade liberalization. Further, high reallocation costs across sectors, firms and geographical locations that are particularly burdensome for poor households affect their ability to move from contracting to expanding areas of economic opportunity. On the consumption side, the pass-through of lower prices (resulting from trade liberalization) from the border to consumers has been affected by high domestic transport costs and a range of market frictions.<sup>1</sup> In analyzing the effect of trade opening on greater economic inclusion, this literature has focused on the tariff structure in the domestic economy. But the conditions of access to foreign markets, as determined by tariff policies of trading partners, are also key to capturing export opportunities and generating employment and/or wage gains for poor households. There are, in fact, a few studies which show that improving conditions of market access reduce poverty rates.<sup>2</sup> What then are the market access conditions for the poor? Are there ample opportunities for them to reap benefits from exporting? This is a particularly relevant question given evidence which suggests that individual countries often protect their own "poor" (or declining sectors) by raising tariffs and/or non-tariff barriers on the goods these households/individuals (or declining sectors) produce or are employed in the production of. But, when all countries protect the sectors where the poor work and if the poor are employed in similar kind of sectors in different countries, a “coordination problem” arises: the goods (and services) produced by the poor will face higher barriers to trade than those provided by the non-poor, and the resulting decline in the global demand will lower the price of goods and services that the poor produce.

Tariff and non-tariff barriers faced by the poor, if relatively higher, may therefore impair income distribution by keeping poor workers disconnected from global markets. The potential problem is then not too much globalization, but too little "inclusive" globalization. This view is in stark contrast to the rhetoric that is usually seen and heard.

In light of the above, the objective of the paper is to assess the obstacles that “poor” households in a given country face when trying to export goods to the rest of the world. In doing so, we investigate the overall tariff profile on exports from India. Tariff data are matched with consumption/income data by the industrial classification of each household member’s sector

> 1 For the impact of high domestic transport costs see Nicita (2009), Emran and Hou (2013), and Atkin and Donaldson (2012). For the impact of market frictions see Campa and Goldberg (2002), Atkin and Donaldson (2012), Ural Marchnad (2012) and Han et al. (2016).

> 2 See, for example, Porto (2010) and McCaig (2011).

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