Do Poverty Rates Matter for Trade Openness in Developing Countries?

A voluminous literature has been devoted to the effect of countries’ participation in international trade (for example through trade policy reforms and greater trade openness) on their poverty level, but not on the issue the other way around. The current analysis contributes to filling this gap in the literature by examining the effect of poverty on trade openness in a set of 99 developing countries over the period 1980–2014. Results suggest that while over the full sample poverty exerts a negative effect on trade openness, this effect ultimately depends on countries’ development levels, proxied by their real per capita income level. A rise in poverty levels reduces trade openness in relatively poor countries, but increases it in relatively advanced economies. These findings suggest that enhancing the ability of poor countries to participate in international trade would help promote greater trade openness, which could in turn help reduce poverty. The international community has a key role to play in that respect.