Hoyos, Mateo, Coronado, José Alejandro ORCID: https://orcid.org/0009-0006-4046-8697 and Klein Martins, Guilherme (2026) Local and spillover effects of trade on structural transformation: evidence from Brazil. Journal of Development Economics. ISSN 0304-3878 (Print), 1872-6089 (Online) (In Press)

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Abstract

This paper investigates the impact of trade liberalization on structural transformation, leveraging quasi-experimental tariff reductions from Brazil’s 1990s reforms. Building on recent cross-regional macroeconomic literature, we extend the traditional shift-share framework to estimate both local and spatial spillover effects on sectoral employment shares, providing insights into aggregate outcomes. Regions more exposed to tariff reductions experienced a reallocation of employment away from manufacturing and non-tradables and toward primary activities. Consistent with a comparative-advantage channel, the shift toward the primary sector is stronger in regions with higher agricultural potential. Spillover effects—mediated through migration or gravity—partially offset local deindustrialization in manufacturing but amplified declines in non-tradables. These effects persisted over two decades and remained robust to alternative structural transformation hypotheses, concurrent economic shocks, and controls for expenditure exposure. Overall, our findings support theories highlighting comparative advantage as a key driver of trade-induced structural transformation.

Item Type:	Article
Additional Information:	Preprint GALA records: https://gala.gre.ac.uk/id/eprint/50202/.
Uncontrolled Keywords:	shift-share, tariffs, trade liberalization, deindustrialization, structural transformation.
Subjects:	H Social Sciences > H Social Sciences (General) H Social Sciences > HF Commerce J Political Science > JL Political institutions (America except United States)
Faculty / School / Research Centre / Research Group:	Greenwich Business School Greenwich Business School > Political Economy, Governance, Finance and Accountability (PEGFA) Journal of Economic Literature Classification > Political Economy, Governance, Finance and Accountability (PEGFA) Greenwich Business School > School of Accounting, Finance and Economics
Last Modified:	04 Jun 2026 15:40
URI:	https://gala.gre.ac.uk/id/eprint/53688

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