Impact Of Trade Liberalization Research Articles

Has Trade Liberalization Promoted Energy Efficiency in Enterprises?

Improving energy efficiency is a way for China’s economy to achieve sustainable development. Using data on listed industrial enterprises in China from 2000 to 2022, we investigate the impact of trade liberalization on the energy efficiency of Chinese firms and its mechanism of action at the micro-firm level. Our findings suggest that trade liberalization has greatly contributed to firms’ energy efficiency and the main conclusions in this paper still hold after a series of robustness tests. Further research shows that two channels that contribute to the improvement of firms’ energy efficiency are the expansion of the firm’s size and the improvement of production efficiency induced by trade liberalization. Another significant route according to which trade liberalization influences energy efficiency improvements by firms is the dynamic decomposition of industrial energy efficiency, which shows that 70.07% of industrial energy efficiency enhancement is due to structural adjustments. The heterogeneity analysis results show that the energy saving impact of trade liberalization is stronger for non-exporting, foreign-funded, growth-oriented enterprises that are based in the eastern region. Our study presents new ideas for the realization of energy conservation and emissions reduction from the perspective of trade liberalization, which is instructive in regard to the improvement of sustainable development of enterprises.

Trade liberalization and total factor productivity in Brazil: A vecm modeling.

This paper aims to investigate trade openness's effects on total factor productivity (TFP) using monthly data from December 1991 to March 2024. The analysis also incorporated absorptive capacity to examine the behavior of TFP components. Our findings from a multivariate VECM model indicated that absorptive capacity did not significantly impact TFP, even in the short term. Conversely, the increase in openness contributes to raising TFP by about 26 and 0.16 percentage points in the short and long term, respectively. Additionally, absorptive capacity and trade openness Granger-Cause short- and long-term components of TFP. These results are statistically significant at conventional significance levels. Policymakers should consider the dynamic effects of their policy actions on other sectors of the economy that were not initially the focus of the policy. Policymakers should develop concrete policies that improve the efficient use of resources in production chains to potentialize the productive impact of trade liberalization, including investment in human capital, ICT, and research and development.

The Impact of Trade Liberalization on China-ASEAN Trade Relations along the Belt and Road: An Augmented Gravity Model Analysis

While trade liberalization has become increasingly important in global economic integration, little is known about its specific impact on China-ASEAN bilateral trade relations within the Belt and Road Initiative framework, particularly regarding cultural factors. This study addresses this gap by examining how trade liberalization affects bilateral trade dynamics between China and ASEAN nations, with special attention to linguistic and religious proximity as potential moderators. Using an augmented gravity model and panel data from 2012-2022, we find that increased trade liberalization significantly enhances bilateral trade volumes, with stronger effects in export trade compared to imports. Moreover, shared linguistic foundations and religious beliefs amplify these positive effects, particularly in ASEAN countries with lower economic development levels. These findings provide crucial insights for policymakers seeking to strengthen regional economic integration and optimize trade cooperation strategies along the Belt and Road.

The Impact of Trade Liberalization on Economic Growth in South Africa

The failure of the South African economy to achieve the desired economic expansion raised a serious concern to investigate the potency of trade liberalization policy adopted in the country. This is evidence in macroeconomic indices such as high level of unemployment, poverty and most importantly sluggish economic growth. It is against this back drop that this study was spurred to conduct an analysis of the impact of trade liberalization on economic growth in South Africa covering the period of 1986-2022. The mixed order of integration revealed by the unit root test informed the decision to adopt the ARDL method of estimation. The main findings of interest in this study is the existence of a strong positive relationship between trade liberalization and economic growth in South Africa. Thus, the study concludes that economic integration is healthy for the national economy and hence more liberalization policies should be strategically embrace. The study recommends that the African governments especially South Africa should further open it economic border to allow for free trade with other economies of the world.

The Impact of Trade Openness on the Industry Reality in Iraq for the Period (2004-2022)

Iraq is one of the prominent countries that used to have important industries and enjoyed consumer acceptance, competitiveness, and presence in regional and global markets. However, after 2003 and due to trade liberalization, there needed to be more in the structure of the Iraqi economy. This directly affected the reality of the Iraqi industrial sector, leading to the entry of goods and products from all over the world. With the increase in population and government expenditures, which relied on commodity imports to meet local needs, all aspects of industry in the country were eliminated. The importance of research lies in shedding light on the role of international trade (import and export) in global economies, highlighting the shortcomings in trade policy management, demonstrating the impact of trade openness on the industrial sector's contribution to economic development, and the need for realistic measures to rescue this vital sector from deterioration in Iraq. Moreover, the research problem is based on the direct negative impact of trade liberalization policy on the reality of the industrial sector in the country. Increased reliance on foreign sources to meet local economic needs is attributed to the production apparatus's deficiencies, backwardness, and stagnation, rendering it unable to meet total domestic demand. The research aims to shed light on the role of foreign trade in global economies and to clarify the shortcomings in trade policy management, as well as the extent of the impact of trade liberalization on the reality of the industrial sector in achieving economic development. The research found that the industrial sector in Iraq was negatively affected throughout the period (2004-2022) due to the compulsory trade liberalization policy, which led to the shutdown of factories and plants because of the low prices of imported goods. Paper type Research paper.

The Impact of Trade Openness on the Reality Industry in Iraq for the Period (2004-2022)

Iraq is one of the prominent countries that used to have important industries and enjoyed consumer acceptance, as well as competitiveness and presence in regional and global markets. However, after 2003 and due to trade liberalization, there was a general weakness in the structure of the Iraqi economy. This directly affected the reality of the Iraqi industrial sector, leading to the entry of goods and products from all over the world. With the increase in population and government expenditures, which relied on commodity imports to meet local needs, all aspects of industry in the country were eliminated. The importance of research lies in shedding light on the role of international trade (import and export) in global economies, highlighting the shortcomings in trade policy management, demonstrating the impact of trade openness on the industrial sector's contribution to economic development, and the need for realistic measures to rescue this vital sector from deterioration in Iraq. And the problem of the research is based on the direct negative impact of trade liberalization policy on the reality of the industrial sector in the country. Increased reliance on foreign sources to meet local economic needs is attributed to the deficiencies, backwardness, and stagnation of the production apparatus, rendering it unable to meet total domestic demand. The aim of the research is to shed light on the role of foreign trade in global economies and to clarify the shortcomings in trade policy management, as well as the extent of the impact of trade liberalization on the reality of the industrial sector in achieving economic development. The research found that the industrial sector in Iraq was negatively affected throughout the period (2004-2022) due to the compulsory trade liberalization policy, which led to the shutdown of factories and plants as a result of the low prices of imported goods. Paper type Research paper.

Embracing the African continental Free trade Area: Unpacking Malawi’s economy response to trade liberalization

The impact of trade liberalization on Malawi’s economy has been a hotly debated topic. To shed light on the subject, a study was conducted using the PEP-1–1 CGE model and the latest Malawi’s Social Accounting Matrix (SAM) from 2019. The results were eye-opening, revealing the potential effects of the African Continental Free Trade Area (AfCFTA) on various sectors of the economy. The removal of trade tariffs is predicted to have a significant impact on prices, with a decrease of 26.31% in the agricultural sector alone, services (−7.88%), public administration (−9.92%), and manufacturing and industry (−11.23%) imposing hopes of improving food affordability and food security. However, it is expected to have adverse impacts on wage rates in the agricultural sectors (−18.78%), manufacturing and construction (−19.01%), services (−2.79%) and public administration (−15.81%). Additionally, while exports are expected to increase, the country’s balance of payments may suffer as imports are likely to outweigh foreign earnings. This could also lead to a decrease in government revenue from taxes. To mitigate these effects, the study suggests implementing export restructuring strategies, particularly in industries like manufacturing and construction, and promoting diversification of local production to boost competitiveness and improve wage rates. With these measures in place, the government will not only offset potential losses but also tap into new sources of taxable income.

Trade liberalization, labor market power, and misallocation across firms: Evidence from China's WTO accession

This paper studies the impact of trade liberalization on the heterogeneity of labor market power among manufacturing firms, which is a potential source of misallocation. The model shows that heterogeneity of labor market power distorts the allocation of the factors of production, and the variance in the natural log of the markdown serves as a sufficient statistic to infer its negative impact on overall production efficiency. Using China's accession to the World Trade Organization (WTO) as a natural experiment, the empirical results suggest that lower input tariffs decrease the variance in the natural log of the markdown, which reflects the improvement in misallocation. In contrast, reductions in output tariffs have no significant effects.

Quantifying the impact of trade liberalization on Lao imports (evidence from product-level data)

In pursuing economic development after market-oriented reforms, Lao PDR has actively liberalized imports through engagement in regional and multilateral trade agreements. However, a substantial research gap exists in assessing the impact of this liberalization, especially in terms of ex-post empirical studies, which are essential for nuanced policy evaluation. This study aims to thoroughly quantify the impact of tariff liberalization on Lao imports, specifically examining how the elimination of tariffs under regional trade and multilateral trade schemes affects Lao imports. In this study, a balanced gravity panel dataset at a product level from 2013 to 2022 was constructed using data from the Lao Official Import Management Database for a standard gravity model analysis. Results of this analysis reveal that tariff liberalization has significantly boosted Lao imports with an elasticity of -0.327. Counterfactual analysis strengthens this finding, indicating an approximate 6.7% increase in the average value of imports from 2018 to 2022.

The impact of trade liberalization on firms’ product and labor market power

Abstract This paper examines the impact of trade liberalization on firms’ product and labor market power. We estimate the prevalence and intensity of price-cost markups and either wage markups or wage markdowns, taking the dependence between these model-consistent measures of product and labor market power into account. Exploiting reductions in tariffs upon China’s World Trade Organization accession, we find that trade liberalization has not switched firms away from exercising product and labor market power. Reducing input tariffs has widened price-cost markups, narrowed wage markdowns, and widened wage markups at the firm level. We reveal heterogeneous trade liberalization effects on the intensity of firms’ product and labor market power.

Municipality manufacturing agglomerations unveiled: Exploring spatial structural transformation in Mexico under import substitution and trade liberalisation

This paper conducts a comprehensive long-run analysis of the global spatial concentration and locational dynamics of manufacturing agglomerations in Mexico. While prior research on Mexico has examined the impact of trade liberalisation on processes of regional convergence or divergence, effects on the scale, location and dynamics of agglomerations and local specialisation remain underexplored. To address this gap in the literature, we use a newly-collated municipality-level dataset containing more granular data distinct from more frequently used state-level data. Our analysis spans the period 1950–2019, capturing the full extent of the growing importance of the manufacturing sector and providing a nuanced perspective on the evolution of agglomerations and local specialisation patterns. We investigate shifts in agglomeration during import substitution and following the introduction of trade liberalisation, examining whether new agglomerations emerged or existing ones attracted further economic activity and how these changes impacted local specialisation. In extension, we also examine recent trends, assessing the persistence or alteration of agglomeration dominance in the north of the country. In doing so, our analysis provides valuable insights into the intricate dynamics of agglomerations and local specialisation and their significance in shaping regional disparities.

Soybean overweight shock (SOS): The impact of trade liberalization in China on overweight prevalence

This study investigates the overweight effect of the soybean import shock (referred to as the soybean overweight shock or “SOS”) on China, the largest importer of soybeans worldwide. By using China's soybean import liberalization in 1996 as a natural experiment, which involved the removal of soybean tariff rate quota (TRQ) policy and a reduction in soybean import tariffs from 114% to 3%, we found significant SOS effects. The soybean import shock can account for 10.76% of the observed increase in overweight probability between 1989 and 2006. Mechanism analysis finds that the exposure to the soybean import shock leads to a significant decrease in the market price of soybean oil and an increase in soybean oil consumption, it also increases the likelihood of being overweight through dining out, eating food prepared outside, and eating fried foods. Additionally, we discovered stronger SOS effects in urban residents, females and individuals with relatively lower family income.

Does opening up change customs? Evidence from trade liberalization and marriage payments in China

AbstractThere is widespread concern about whether opening up changes cultural customs. However, empirical evidence remains limited. In this paper, we provide new evidence on this issue by examining the impact of trade liberalization on marriage payment customs in China. We first provide a conceptual framework based on a labor market perspective to illustrate how trade liberalization has driven changes in marriage payment customs. Then, using China's World Trade Organization accession as a quasi‐natural experiment, this paper uses the difference‐in‐differences strategy and China's large‐scale household survey data to conduct an empirical study. Our results suggest that trade liberalization has reduced marriage payments in China, especially the bride price but not the dowry. Evidence from industry and census surveys suggests that the declining earning ability of marriageable men and the increasing relative economic status of women have driven down the bride price from the supply and demand sides, respectively. We also find that the impact of trade liberalization has been concentrated on southern and rural households. In addition to the decline in the bride price, the bad practice of child marriage in China has also been alleviated as a result.

Impact of Trade Liberalization on Economic Growth in Developing Countries

In order to investigate the impact of trade liberalisation on economic growth, this paper analyses the existing research on trade liberalisation and growth, revises the well-used Sachs and Warner (1995) trade liberalisation index for 193 countries up to 2010, and applies a dynamic growth model to a substantial panel data set covering the years 1985 to 2010. The results suggest that the impact of trade liberalisation on economic growth differs depending on the industrial development level of a country. Lower-middle-income countries, on average, experience a minimum 3% greater advantage from the liberalisation of trade compared to other growing nations. This finding provides a persuasive rationale for altering the conventional "Washington Consensus" methodology and taking into account the economic development phase while suggesting trade policy modifications.

The impact of trade liberalisation and exchange rate undervaluation on exports, imports, and trade balance of Latin American countries (1970-2019)

The impact of trade liberalisation and exchange rate undervaluation on exports, imports, and trade balance of Latin American countries (1970-2019)

Impact of Trade Liberalisation and MSME Classification on Productivity of Indian Manufacturing Firms

This article examines the effects of tariff and non-tariff reductions on firm-level productivity of large as well as Micro, Small and Medium Enterprises (MSMEs) in India’s manufacturing sector for the 1999–2009 period. We calculate input and final goods tariffs, effective rates of protection and non-tariff barriers (NTBs) for broad product groups using information from India’s Exim Policy of 1997–2003 and 2004–2009 to examine this impact. We use a balanced as well as unbalanced firm-level panel data set, while accounting for firm, industry, state and time-specific factors. By using fixed effect models and Heckman’s two-step estimation procedure, we find that trade liberalisation is associated with improved firm-level productivity for large firms but not in the case of MSMEs. We posit that this might be due to the relative disadvantages that Indian MSMEs face which prevent them from benefiting from trade liberalisation. We also find that productivity gains arising from the sourcing of imported inputs have been greater than those arising from increased product competition and that NTB liberalisation has had a greater impact compared to tariff liberalisation on firm-level productivity. Changes in MSME legislation and the classification of firms are also found to have a bearing on firm performance. Our study contributes to the literature by confirming the need to focus specifically on constraints faced by MSMEs if they are to benefit from trade liberalisation. It highlights the importance of liberalising trade in intermediates as well as the role of MSME classification in enabling productivity gains. JEL Codes: L6, D24, L1, F13

The effects of trade liberalization on inequality in nutrition intake: empirical evidence from Indian districts

BackgroundDespite the positive impact of trade liberalization on food availability in India, severe inequality in nutrition consumption at the district level persists. Empirical evidence on the relationship between trade liberalization and nutrition consumption inequality often offers a country-level perspective and generates disputed outcomes. The study aimed to explore the effects of trade liberalization on inequality in nutrition consumption at the district level in India and to examine the heterogeneity of the impact on different nutrition consumption.MethodsOur study employed the Gini Index to measure nutrition consumption inequality of 2 macronutrients and 5 micronutrients at the district level in India during 2009–2011, utilizing the comprehensive FAO/WHO individual food consumption data. The import tariff was adopted as a proxy for trade liberalization, as its externally imposed nature facilitates a causal interpretation. We further identified the direct causal relationship between food trade liberalization and inequality in nutrition consumption using a fixed effects model.ResultsThe results show that more than 50% of the individuals in the survey districts did not meet the dietary standards for both macronutrients and micronutrients. Food trade liberalization hindered the improvement of inequality in nutrition consumption. As import tariffs were reduced by 1%, the inequality in intake of calories, zinc, vitamin B1, and vitamin B2 increased significantly by 0.45, 0.56, 0.48, and 0.66, respectively, which might be related to food market performance. The results also highlight the positive role of the gender gap, female-headed households, and caste culture on inequality in nutrition consumption in India.ConclusionsTo ease the shock of liberalization and minimize its inequality effects, complementary measures should be adopted, such as improving food logistic conditions in poor areas, and nutrition relief schemes.

Pro-poor consumption effects of trade liberalization: Evidence from China

This study examines the impact of trade liberalization on the consumption welfare of urban households in China. The results indicate that trade liberalization in consumer goods has improved the consumption welfare of Chinese urban households with a “pro-poor” distribution across regions and households in a region, suggesting that the consumption effects are more pronounced for less developed regions and low-income households in a region. Within a city, differences in the consumption effects arise from variations in household consumption structures and the tariff-price pass-through among different types of products. Across cities, differences in the consumption effects stem from the dual heterogeneity in industrial structure and consumer demand. The variety effect resulting from changes in the types of imported consumer goods also enhances the consumption effects of trade liberalization.

The tax revenue implication of trade liberalisation in sub‐Saharan Africa: Some new evidence

AbstractDespite the advent of trade liberalisation, trade taxes still remain a key source of tax revenues in sub‐Saharan Africa. Further trade reforms in the form of the African Continental Free Trade Area could, however, hinder output growth in the region if these reforms lead to a decline in total tax revenues. Motivated by this conundrum, this paper investigates the impact of trade liberalisation on tax revenues across a panel of sub‐Saharan African countries. The results indicate that trade liberalisation is associated with an increase in total tax revenues. Also, the reduction of import and export duties significantly increases and decreases domestic and trade tax revenues, respectively. In addition, greater urbanisation is associated with an increase in total tax revenues, while inflation decreases tax revenues.

Trade liberalisation and manufacturing employment in developing countries

The manufacturing sector has played an important role in the structural transformation process in the developing world by providing jobs and income opportunities. Using data from 131 developing countries from 1991 to 2020, we estimate the impact of trade liberalisation on manufacturing employment using panel fixed-effects and instrumental variable regression approaches. We find that trade liberalisation – on average – has harmed manufacturing employment in developing countries. There are considerable differences at the regional level; the impact has been most substantial in sub-Saharan African and Latin American countries. At least in these regions, trade liberalisation has contributed to deindustrialisation. Policies that improve labour productivity in manufacturing will increase the competitiveness of manufacturing firms in these countries in the face of growing trade globalisation.