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The Impact of Trade Openness on Poverty in Iran: Simultaneous Equations System Method

Author

Listed:
  • Atrkar Roshan, Sedigheh

    () (Associate Professor of Economics, Alzahra University)

  • Hashemi, Zahra

    () (MA in Economics, Alzahra University)

Abstract

It is often argued that open economies grow faster than closed economies. Considering the potential and significant role of trade on economic growth, the purpose of this study is to investigate the relationship between trade openness and poverty during the 1973 to 2013 in Iran. Theoretical literature argued that, trade openness affects poverty through multifaceted channels, andthere is also evidence that these channels may often interact dynamically over space and time. Hence the trade-poverty linkage is rather complex and heterogeneous, and the single-equation approach may have difficulties in taking into account these all impacts. Therefore, in order to consider the impact of these multiple channels of influence, simultaneous equations system approach and three-stage least squares estimator is applied in this research. The findings of this study indicate that, trade openness leads to increase economic growth, and through economic growth it then affected poverty indirectly. The results also show a direct relationship between real GDP and inequality. So that inequality is increased along with economic growth during the period under study. Based on the results of this research, globalization had also an increasing effect on poverty during the study period. Finally, trade openness directly increased poverty during the period of the study too.

Suggested Citation

  • Atrkar Roshan, Sedigheh & Hashemi, Zahra, 2016. "The Impact of Trade Openness on Poverty in Iran: Simultaneous Equations System Method," Quarterly Journal of Applied Theories of Economics, Faculty of Economics, Management and Business, University of Tabriz, vol. 3(1), pages 183-204, June.
  • Handle: RePEc:ris:qjatoe:0039
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    More about this item

    Keywords

    Trade openness; Poverty; Inequality of income distribution; Economic growth; Simultaneous equations; Three-Stage Least Square Estimator (3SLS).;

    JEL classification:

    • D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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