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An Empirical Investigation of the Relationship between Trade Liberalization and Poverty Reduction: A Case for Pakistan

Author

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  • Muhammad Shahbaz Akmal

    (Corresponding Author/Research Officer at Social Policy and Development Center, Karachi, Pakistan.)

  • Qazi Masood Ahmad

    (University of Karachi, Pakistan.)

  • Mohsin Hussain Ahmad

    (University of Karachi, Pakistan.)

  • Muhammad Sabihuddin Butt

    (University of Karachi, Pakistan.)

Abstract

In 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.

Suggested Citation

  • Muhammad Shahbaz Akmal & Qazi Masood Ahmad & Mohsin Hussain Ahmad & Muhammad Sabihuddin Butt, 2007. "An Empirical Investigation of the Relationship between Trade Liberalization and Poverty Reduction: A Case for Pakistan," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 12(1), pages 99-118, Jan-Jun.
    • Handle: RePEc:lje:journl:v:12:y:2007:i:1:p:99-118
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    References listed on IDEAS

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    Cited by:

    1. Muhammad Shahbaz & Faridul Islam, 2011. "Financial Development And Income Inequality In Pakistan: An Application Of Ardl Approach," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 36(1), pages 35-58, March.
    2. Muhammad Shahid Hassan & Samra Bukhari & Noman Arshed, 2020. "Competitiveness, governance and globalization: What matters for poverty alleviation?," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 22(4), pages 3491-3518, April.
    3. Fatima, Amber & Shahbaz, Muhammad & Islam, Faridul, 2012. "Nexus of Trade, Investment and Poverty: Evidence from Pakistan," Bangladesh Development Studies, Bangladesh Institute of Development Studies (BIDS), vol. 35(2), pages 87-108, June.
    4. James Nyarkoh, Bright, 2017. "Modelling Trade Liberalisation-Poverty Nexus for Ghana," MPRA Paper 76209, University Library of Munich, Germany.
    5. Atif Khan Jadoon & Ambreen Sarwar, 2020. "Is Trade Liberalisation Pro‐Poor in Pakistan? Evidence from Large‐Scale Manufacturing," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 53(3), pages 360-394, September.
    6. Muhammad, Shahbaz & Faridul, Islam & Muhammad Sabihuddin, Butt, 2011. "Devaluation and income inequality: Evidence from Pakistan," MPRA Paper 35522, University Library of Munich, Germany, revised 21 Dec 2011.
    7. Syed Tehseen Jawaid & Abdul Waheed, 2017. "Contribution of International Trade in Human Development of Pakistan," Global Business Review, International Management Institute, vol. 18(5), pages 1155-1177, October.
    8. Muhammad Shahbaz & Faridul Islam & Muhammad Sabihuddin Butt, 2013. "Devaluation and Income Inequality Nexus: Evidence from Pakistan," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 1(4), pages 48-58, April.
    9. Adeniyi Ì. Afolabi & Kafilat A. Sotan & Shakirat O. Salahudeen, 2020. "Trade policy and economic growth in Nigeria," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 84-99,100-1.
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    More about this item

    Keywords

    Trade; Liberalization; Poverty;
    All these keywords.

    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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