This paper analyzes the distributional impacts of trade reforms in rural areas of Bangladesh. The
liberalization of trade in irrigation equipment and fertilizer markets during the early 1990s has led
to structural changes in the agricultural sector and a significant increase in rice productivity. A
resulting increase in output has been associated with a decline in producer and consumer rice
prices of approximately 25 percent. Using a combination of ex-post and ex-ante approaches, we
investigate the implications of the changes in rice productivity and prices for the welfare of
households. We find that the net effects of increased rice productivity and lower rice price
benefited the poor. Regardless of the particular category analyzed, the poorest households
emerged as being particularly positively affected by reforms in the 1990s. This mainly reflects the
fact that they are predominantly net rice buyers in both urban and rural markets. In contrast, large
net sellers of rice, among the better-off households in the rural areas, were the main losers. Since
net buyers in rural areas tend to be poorer than net sellers, trade liberalization has benefited the
poor. Although we are not able to test empirically what has happened to the welfare level of
agricultural wage earners, secondary evidence suggests that they have gained from trade
liberalization.