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Poverty and employment impact of trade liberalization in Nigeria: empirical evidence and policy implications

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  • Balogun, Emmanuel Dele
  • Dauda, Risikat O. S.

Abstract

This paper analyzes quarterly data which spans the period 1985 to 2010 to investigate the interrelationship between trade liberalisation, employment dynamics and the implications for poverty alleviation in Nigeria. An overview of macroeconomic trends and patterns during the period show that although the Nigerian economy experienced growth, it was accompanied by rapid rise in unemployment and poverty. The econometric analysis, estimated by systems equation model, related terms of trade, implicit producer price incentives, openness and macroeconomic policy outcomes on agricultural and industrial sector incomes per capita and total trade. The findings tended to show that the fortunes of these sectors deteriorated contrary to the assertion that a positive relationship exists between liberalization and poverty reduction via improved productivity of labor intensive smallholder farm and firms enterprises. While the apparent growth in total trade seemed to be buoyed by positive export supply shocks, deteriorating terms of trade and biased producer incentives structure penalized domestic manufactures and farming, thereby accentuating poverty. This adverse consequence is attributable to the adoption of import substitution industrialization strategy which encouraged the influx of foreign firms that are appendages of multinationals. In concluding, the paper calls for a shift in policy approach to economic development from the pervasive import substitution trade strategies which tended to displace labor to an export led strategy guided by the doctrine of factor endowments.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41006.

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Date of creation: 26 Aug 2012
Date of revision: 05 Sep 2012
Handle: RePEc:pra:mprapa:41006

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Keywords: Trade liberalization; Employment; Poverty reduction;

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  1. Anderson, Kym & Martin, Will, 2005. "Agricultural trade reform and the Doha development agenda," Policy Research Working Paper Series 3607, The World Bank.
  2. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  3. Rattso, Jorn & Torvik, Ragnar, 1998. "Zimbabwean Trade Liberalisation: Ex Post Evaluation," Cambridge Journal of Economics, Oxford University Press, Oxford University Press, vol. 22(3), pages 325-46, May.
  4. Joseph Francois & Hans van Meijl & Frank van Tongeren, 2005. "Trade liberalization in the Doha Development Round," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 20(42), pages 349-391, 04.
  5. Milner, Chris & Wright, Peter, 1998. "Modelling Labour Market Adjustment to Trade Liberalisation in an Industrialising Economy," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 108(447), pages 509-28, March.
  6. Philippa Dee & Kevin Hanslow, 2002. "Multilateral liberalisation of services trade," International Trade, EconWPA 0207002, EconWPA.
  7. Sébastien Dessus & Kiichiro Fukasaku & Raed Safadi, 2001. "La libéralisation multilatérale des droits de douane et les pays en développement," Cahiers de politique économique du Centre de Développement de l'OCDE 18, OECD Publishing.
  8. Van der Mensbrugghe, Dominique & Beghin, John C., 2005. "Global Agricultural Reform: What is at Stake?," Staff General Research Papers 12230, Iowa State University, Department of Economics.
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