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Trade Liberalization and Poverty in Bangladesh


  • Raihan, Selim


The impact of trade liberalization on growth and employment is a much debated and controversial issue. In theory, trade liberalization results in productivity gains through increased competition, efficiency, innovation and acquisition of new technology. Trade policy works by inducing substitution effects in the production and consumption of goods and services through changes in price. These factors, in turn, influence the level and composition of exports and imports. In particular, the changing relative price induced by trade liberalization causes a more efficient reallocation of resources. Trade liberalization is also seen as expanding economic opportunities by enlarging the market size and enhancing the impact of knowledge spillover. However, empirical evidence to support these propositions is far from conclusive. Both cross-country and country-specific studies have failed to suggest any conclusive evidence to support the claim that trade liberalization promotes economic growth and aids net employment generation. There have been concerns over whether the impact of trade liberalization has been favourable to the domestic economy in Bangladesh. There is a lack of consensus on the issue. There is also continuing debate over the future direction of trade liberalization in Bangladesh. Questions have been raised over whether Bangladesh ought to undertake further drastic wholesale liberalization of trade or adopt a more gradual approach. Against this backdrop, this paper assesses trade liberalization in Bangladesh and examines its impact on growth and employment in the country.

Suggested Citation

  • Raihan, Selim, 2008. "Trade Liberalization and Poverty in Bangladesh," MPRA Paper 37905, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:37905

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    References listed on IDEAS

    1. Khondker, Bazlul H. & Raihan, Selim, 2004. "Welfare and Poverty Impacts of Policy Reforms in Bangladesh: A General Equilibrium Approach," Centre on Regulation and Competition (CRC) Working papers 30588, University of Manchester, Institute for Development Policy and Management (IDPM).
    2. V N Balasubramanyam & D Sapsford & M A Salisu, "undated". "Foreign Direct Investment and Growth," Working Papers ec13/94, Department of Economics, University of Lancaster.
    3. Greenaway, David & Morgan, Wyn & Wright, Peter W, 1998. "Trade Reform, Adjustment and Growth: What Does the Evidence Tell Us?," Economic Journal, Royal Economic Society, vol. 108(450), pages 1547-1561, September.
    4. Carneiro, Francisco Galrao & Arbache, Jorge Saba, 2003. "The Impacts of Trade on the Brazilian Labor Market: A CGE Model Approach," World Development, Elsevier, vol. 31(9), pages 1581-1595, September.
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    Cited by:

    1. John Gilbert & Nilanjan Banik, 2010. "Socioeconomic Impacts of Cross- Border Transport Infrastructure Development in South Asia," Development Economics Working Papers 21803, East Asian Bureau of Economic Research.
    2. Amber, Fatima & Muhammad, Shahbaz & Faridul, Islam, 2012. "Nexus of trade, investment and poverty: evidence from Pakistan," MPRA Paper 39068, University Library of Munich, Germany, revised 20 May 2012.

    More about this item


    Trade Liberalization; Economic Growth; Poverty; Bangladesh;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes


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