Impacts of Trade Liberalization in the Least Developed Countries: Evidence From Lao PDR
Phouphet Kyophilavong
Faculty of Economics and Business Management, National University of Laos, Vientiane, Lao PDR
Search for more papers by this authorCorresponding Author
Kazunobu Hayakawa
Bangkok Research Center, Institute of Developing Economies, JETRO, Bangkok, Thailand
Corresponding author: Kazunobu Hayakawa, Bangkok Research Center, Japan External Trade Organization, 127 Gaysorn Tower, 29th Floor, Ratchadamri Road, Lumphini, Pathumwan, Bangkok 10330, Thailand. Email: [email protected]
Search for more papers by this authorPhouphet Kyophilavong
Faculty of Economics and Business Management, National University of Laos, Vientiane, Lao PDR
Search for more papers by this authorCorresponding Author
Kazunobu Hayakawa
Bangkok Research Center, Institute of Developing Economies, JETRO, Bangkok, Thailand
Corresponding author: Kazunobu Hayakawa, Bangkok Research Center, Japan External Trade Organization, 127 Gaysorn Tower, 29th Floor, Ratchadamri Road, Lumphini, Pathumwan, Bangkok 10330, Thailand. Email: [email protected]
Search for more papers by this authorWe would like to thank an anonymous referee, Shujiro Urata, Kiyoyasu Tanaka, Kyoji Fukao, Satoru Kumagai, Keola Souknilanh, and the seminar participants at the Institute of Developing Economies (IDE-JETRO) for their invaluable comments. All remaining errors are ours.
Abstract
This study empirically investigates the effects of tariff reductions in a least developed country on its economy. Specifically, we focus on tariff reductions based on the ASEAN Free Trade Area (AFTA) in Laos. First, we analyze how the reduction of AFTA tariff rates in Laos affects Laos's imports from AFTA member countries. Our main finding is that the reduction of AFTA tariffs in Laos does not significantly change Laos's imports. Second, we investigate their effects on plant-level employment. Consistent with the observation of a negligible change in Laos's imports, we find no significant changes in plant-level employment. In short, although Laos decreased its tariff rates against other AFTA members, imports from them did not significantly increase, and no significant changes occurred in employment. We discuss several possible reasons for these insignificant effects.
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