The impact of globalization, foreign direct investment and trade openness on poverty: a case study of Pakistan

Abstract

Introduction. The central purpose of this study is to estimate the impact of globalization on poverty in Pakistan. Poverty is world massive curse in the previous and present years. Different organizations and institutions of the world are struggling to eliminate it from the world. Globalization and poverty is corresponding in the world and similarly in Pakistan. Materials and methods. We used time series data from 1970 to 2019 and assigned autoregressive distributed lag (ARDL) model approach to take out empirical results which indicate that Foreign Direct Investment, Trade Openness, and Gross Domestic Product. The ARDL model is one of the most common dynamic unrestricted model in econometric literature. Results. We summarize that globalization has dominant positive influence on poverty and economic growth and considerably decreased level of poverty in Pakistan. Improving trade openness, FDI, and GDP are the central and dynamic for reducing poverty in Pakistan. It indicates that there is tight association between globalization and poverty in the context of Pakistan. Conclusions. This study proposes that utilizing globalization as an instrument and putting together such policies that primarily for the poor’s will help government to eradicate poverty. Although liberalization has contributed to poverty reduction, most of the developed countries have not so much liberalized their economies by maintaining their immigration laws, which discourage the immigration of labor from developing countries including Pakistan. Therefore, we would like to present the following recommendations for policymakers. Pakistan trade is still limited to specific countries. Pakistan has needed to explore its trade to other countries markets. The government should grab measures to revise its immigration laws, structural reforms, policy regarding trade openness, import exports and poverty at macro level, because immigration laws play a very crucial role and the impact of trade openness on poverty is the most significant one. Pakistan should pay some considerable attention to employment creation.Pakistan should pay reasonable interest to improve law and order situation to captivate international business community to invest in Pakistan. Pakistan trade is still limited to specific countries. Pakistan has needed to explore its trade to other country markets.