An Empirical Investigation of the Relationship between Trade Liberalization and Poverty Reduction: A Case for Pakistan
AbstractIn this paper, we have addressed a key issue in the current debate on economic development: the effect of trade liberalization on poverty. We investigated the relationship between trade liberalization and poverty levels both in the long run as well as in the short run for Pakistan. To measure trade liberalization, we used standard indices of trade openness, financial openness and public intervention in the country, while the head-count ratio was used for poverty measurement, and GDP per capita controlled for economic growth. Applying the Johansen Co-integration Techniques and Error Correction Method, for long-run and short-run analyses respectively, our findings suggest that trade liberalization has a cumulative effect on poverty reduction in the long-run but not in the short run in Pakistan. Lower poverty is associated with low taxation and high foreign direct investment, while trade openness does not have a significant impact on poverty reduction, particularly in the short run, in Pakistan.
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Bibliographic InfoArticle provided by Department of Economics, The Lahore School of Economics in its journal Lahore Journal of Economics.
Volume (Year): 12 (2007)
Issue (Month): 1 (Jan-Jun)
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Web page: http://www.lahoreschoolofeconomics.edu.pk/EconomicsJournal/LJEIntro.aspx
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Trade; Liberalization; Poverty;
Find related papers by JEL classification:
- F10 - International Economics - - Trade - - - General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being
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