Impact Of Trade Liberalization Research Articles

International financial integration, the level of development, and income inequality: Some empirical evidence

The period 1970–2015 has seen significant increases in both income inequality and financial globalization. We examine this relationship empirically, focusing on both the Gini coefficient, and the incomes of quintiles as we move up the income scale. In doing so, we take account of both the country's level of development, and the contemporaneous globalization in trade. Overall, our results support the finding that financial globalization tends to increase income inequality. They also suggest that reducing the costs of foreign investment have a bigger impact on inequality than do reducing borrowing costs. Our findings are less definitive with respect to the impact of trade liberalization on income inequality, though the results using the quintile data are supportive of the view that trade liberalization reduces income inequality. Finally, our results provide compelling evidence for the notion that the level of development has a strong nonlinear impact on income inequality, one that is consistent with the “inverted Kuznets curve,” as characterizing the more recent experience.

Import Tariff Liberalization, Employment, and Gender in Ethiopia

This paper analyses the impact of trade liberalization on local labour markets in Ethiopia, with a focus on the gender dimension of employment and on the process of structural transformation. By exploiting rich micro-level data on Ethiopian workers, we evaluate the effect of the Ethiopian trade reforms on the changes and composition of employment. We find that districts more exposed to trade liberalization experienced reductions in their employment levels, especially in female employment. We also show that reductions in tariffs trigger a process of sectoral reallocation from agriculture to services and that this process is particularly pronounced for women.

The Nexus Between Trade Liberalization and Poverty: A Disaggregated Analysis

Decades after trade liberalization, poverty among the developing countries has continued to rise as their economies adjust to fierce and increasing external competition. This study investigates the impact of the 1988 trade reforms on poverty in Pakistan using micro-level data from 1990 to 2005. Using the feasible generalized least squares (FGLS) model in panel setting to address the problem of heteroskedasticity, we explored the impact of trade liberalization on the poverty level in Pakistan. The findings reveal that reductions in import tariffs have increased Pakistan’s level of poverty. Our findings are robust and impervious to different poverty measures (i.e., headcount ratio, poverty gap, and squared poverty gap). Also, it was observed that lagged trade policies are associated with poverty in Pakistan. The rise in poverty may be attributed to the lower participation of the poor in external markets. It is recommended that policymakers enact policies that will encourage poor people to participate in external markets if they wish to benefit from trade liberalization.

Trade liberalization, financial development, and economic growth: A panel data analysis on Turkey and the Turkic Republics

Purpose ― In this study, 5 Turkic Republics (Azerbaijan, Kazakhstan, Kyrgyzstan, Uzbekistan and Turkmenistan) and Turkey are analysed to investigate the impact of trade liberalisation and financial development on economic growth. Methods ― In this study, long-term relationships among trade liberalisation, financial development, and economic growth are analysed by applying unit root, cointegration and causality tests for panel data analysis study for the period 1998 to 2017. Findings ― The findings reveal a strong cointegration relationship between trade liberalization, financial development, and economic growth. It was understood that trade liberalisation positively affected economic growth, and financial development negatively affected economic growth in the long term for the whole panel. However, when the variables are analysed for each country in the panel, it is seen that the sign and severity of the coefficients change. Also, according to panel causality test results, it was understood that there was no causal relationship between variables. Implication ― This paper supports the notion that the direction of the relationship among trade liberalisation, financial development, and economic growth change according to countries in Turkey and the Turkic Republics. Originality ― This paper contributes to the literature by the general view that trade liberalisation and financial development are the driving force of economic growth; these relations may vary according to the country group examined in the studies, the period handled, and the econometric method applied.

Trade Liberalization Process and Its Impact on Agriculture Sector in Nepal

This study examines the process of Nepal's trade liberalization and its impact on Nepalese agriculture sector. It explains and analyzes the various economic policy reforms undertaken in Nepal including trade, fiscal, industrial, and financial reforms; and explains how these reforms supplemented one another to promote trade liberalization. It is descriptive and analytical study. Simple descriptive statistical tools were used to analyze the impact of trade liberalization on agriculture sector in Nepal. The study finds that trade liberalization has not caused any significant changes in the position of Nepalese agriculture sector. It means a condition of Nepalese agriculture has not been improved and it is being deteriorated. Similarly, export/import ratio has been further decreased continuously after trade liberalization implying that power of export of agro product to purchase import of agro product is continuously diminishing. Similarly, there is continuous trade deficit in food item and live animal after trade liberalization. Role of agriculture in the economy has been decreased. It has increased the dependency on foreign agricultural products.

The impact of trade liberalization on individual fertility intention: Empirical evidence from China

AbstractHow trade liberalization affects a country's fertility has been verified by some studies, but little is known about how export trade liberalization impacts individual fertility intention. Using China Health and Nutrition Survey data from 1997 to 2011 and regression analysis, this study finds that a decline in the average external tariff significantly improves the fertility intentions of married women. This conclusion remains robust after overcoming endogeneity problems using an alternative external proxy variable, adopting different average tariff calculation methods, adding other control variables, and considering the son preference. The mechanism test shows that export trade liberalization can affect married women's fertility intentions by affecting family income; moreover, the income effect dominates the substitution and intra‐marital income gap effects. This study provides a new perspective for understanding changes in fertility intention in developing countries. This perspective can promote academic research progress in this field and be of great significance in formulating effective policies to improve fertility intention.

Trade liberalization and regional labor market dynamics: Evidence from China’s WTO accession

We analyze the evolution of the effects of China’s WTO accession on Chinese local labor markets. This is conducted by exploiting the variation in the tariff reductions across industries and the initial differences in the industry specialization of prefecture-level cities. The results reveal that cities facing larger tariff reductions experienced prolonged slower growth in average wages relative to other cities. However, the magnitude of this adverse effects over time form a hump-shape. Cities facing larger tariff reductions experienced growth in informal employment, but only for the short term. For the long term, there was growth in formal employment, which comes from the secondary sector. Higher administrative level cities recovered from the negative impact of trade liberalization on wages earlier than ordinary cities. Our estimation results are robust to various alternative measures, specifications and city samples.

Impact of some Macroeconomic Variables on Tax Revenue in Nigeria

The knowledge of the relationship between tax revenue and the interplay of macroeconomic factors is necessary to maximize the gains of the proposed elimination of non-tariff barriers by the African Union. This study was carried out to investigate the impact of trade liberalization and six macroeconomic variables on tax revenue in Nigeria from 1981-2019, using the autoregressive distributed lag (ARDL) approach to cointegration and the Error Correction Model (ECM). The unrestricted error-correction model was specified in the study by modifying ARDL model. Total tax and domestic tax revenues were predicted by trade liberalization and most macroeconomic variables examined. A unit increase in trade liberalization triggered an increase of 3% in both total and domestic tax revenues when all other variables in the model were held constant. The results of ECM showed that short run and long run equilibrium were present in the system. The macroeconomic variables found to be predictors of both domestic and external tax revenues are share of petroleum and mining in GDP, foreign direct investment, share of agriculture in GDP, per capita income, exchange rate and inflation rate. These are therefore important to explain tax revenue in Nigeria. The key policy recommendation for improved and sustained tax revenue is to embark on comprehensive trade liberalization policies as well as regulate changes in macroeconomic variables.

The Impact of Trade Liberalization and Foreign Direct Investment on Regional Disparity in China

The Impact of Trade Liberalization and Foreign Direct Investment on Regional Disparity in China

The impact of trade liberalisation on mining sector total factor productivity: Evidence from developing countries

While the paradox of plenty is given much weight on raging debates on resource endowment and growth path of the Southern Africa Development Community (SADC) countries. The study seeks to establish the effect of trade liberalisation on mining total factor productivity. The study employed panel data of selected seven countries from the SADC for the period 1990–2017. The countries in the sample include Botswana, South Africa, Tanzania, Namibia, Zimbabwe, the Democratic Republic of the Congo (DRC), and Zambia, and were chosen based on data availability. Hicks-Moorsteen productivity index was applied to generate the total factor productivity change. A panel auto regressive distributed lag model (PARDL) and pooled mean group (PMG) are the estimation techniques used. The inquiry is crucial to SADC because mining production is a source of foreign exchange that directly contributes to economic growth. However, with open economies of SADC study expects the easy flow and diffusion of technology to aid productivity in the mining sector (Griffith, Redding, & Van Reenen, 2014). Results indicate a positive and statistically significant long-run relationship between trade openness and total factor productivity change in the mining sector. The study recommends progressive trade openness in the mining sector, human capital development, research and development to augment technology transfer.

Trade Liberalization Index and Economic Growth in Developing Countries: Does Stage of Development Matter?

This paper analyses the widely used Sachs and Warner (1995) index of trade liberalization for 193 countries extending the period up to 2009 identifying 134 countries as open, 23 countries as closed, and 36 countries with ambiguous status, and then investigates the impacts of trade liberalization on economic growth using a dynamic growth model for a disaggregated levels of income. For this purpose, this study uses the biggest panel data set in this literature covering the period of 1985-2009. The results show that the impact of trade liberalization on economic growth differs based on the income levels of the developing countries. As indicated by the estimated results, the lower-middle-income countries, on average, benefit up to 3.45 percent points more compared to other developing countries from the trade liberalization. This finding makes a strong case for a clear departure from the ‘Washington Consensus’ approach and claims that trade liberalization with the same priority to all developing countries does not ensure economic growth. Also, the findings strongly suggest considering the stage of economic development of the developing countries while recommending their trade policy reforms.

Trade Liberalization in Nepal: Analysis of Its Impact

The objective of this study is to examine the impact of trade liberalization on Nepalese economy over the period 1990-2018. As per studies, trade liberalization increases the areas and size of foreign trade. Nepal has introduced the economic and trade liberalization policy in mid-1980s and started to liberalize its trade and investment after 1990s. After the adoption of economic liberalization, the flow of foreign trade, economic growth of Nepal has been significantly increasing. The impact of trade liberalization on economy is measured in terms of economic growth, trade tax, industrial GDP and ratio of trade tax to total size of trade of Nepal by applying simple and multiple regression models. In Simple regression model, four equations show a positive correlation between INGDP and import, export, total trade, EOI inflation rate.

Trade Liberalization and Economic Growth: The Scenario of the MINT Economies

This study investigated the impact of trade liberalization on economic growth for Mexico, Indonesia, Nigeria and Turkey from 1986 to 2020. The Autoregressive Distributed Lag Bounds approach to cointegration and Toda and Yamamoto causality test were utilized for this study. The long-run results revealed that there is no relationship between trade liberalization and real gross domestic product per capita except for Mexico and in this situation, the significance level was at 10%. The results of the causality test showed that no causality was detected between real gross domestic product per capita and trade liberalization for Mexico and Indonesia. A bidirectional causality between real gross domestic product per capita and trade liberalization was found for Nigeria whereas a unidirectional causality from trade liberalization to real gross domestic product per capita was revealed for Turkey. The no causality results for Mexico and Indonesia means that the policy objectives of trade liberalization and economic growth can be pursued independently in both economies. In addition, the bidirectional causality detected for Nigeria suggests that the policy objectives of trade liberalization and economic growth can be pursued together in Nigeria. Furthermore, the unidirectional causality from trade liberalization to real gross domestic product per capita found for Turkey implies that she employs trade liberalization policies effectively for objectives of economic growth, thus trade liberalization causes economic growth.

Impact of trade liberalization on technical efficiency of mining sector: A case of selected SADC countries

Productive inefficiency and lagging technology progress are major reasons behind the Southern Africa Development Community’s (SADC) continued exportation of unprocessed minerals to the world markets. The study seeks to uncover the impact of trade openness on the technical efficiency of the mining sector in selected SADC countries (Botswana, DRC, Namibia, South Africa, Zambia, and Zimbabwe). Technical efficiency is the ability of any production process to produce maximum output from minimum quantities of inputs. A Cobb Douglas Stochastic Frontier Approach in a single-stage maximum likelihood estimation of Green’s true fixed effects was used to compute technical efficiency (scores) and the technological progress in the mining sector of SADC. Results indicate that there is no technical efficiency gains from trade liberalization during the period under study together with positive and significant technological progress. A coefficient of 0.72 suggests that a 1% increase in trade openness increases technical inefficiency in the mining sector by 0.72%. The parameter coefficient from the truncated normal distribution of the true fixed effects model indicated that technological progress from one year to the next year would lead to a 2.6% increase in the output index of the mining. Technological progress in the mining sector should target upstream mineral value chains instead of only upgrading technology in one dimension of extraction. In addition, countries should collectively and gradually put across laws that force new investments in the extraction of minerals to erect processing plants in mining value addition of host countries to re-direct economies into a growth path. AcknowledgmentsThe authors are grateful to the North West University (RSA) for financing this study.  

Innovation and trade in the presence of credit constraints

AbstractThis paper examines how trade liberalization affects investment in R&D at the firm level. We provide a model with entrepreneurs that differ in their wealth endowments, causing them to rely on external funds to different extents. In the presence of capital market imperfections, this implies heterogeneous access to external financing such that poor entrepreneurs run smaller firms, are less likely to invest in R&D and are more likely to exit the market. Decreasing trade costs resulting from tariff reductions exacerbate these characteristics. Using firm‐level panel data on seven Latin American countries for 2006 and 2010, we find support for our theoretical predictions. While prior research emphasizes a positive impact of trade liberalization on firms’ productivity‐enhancing activities, we provide novel evidence showing that financial constraints can impair the effect on R&D efforts. These results suggest that imperfect capital markets can prevent welfare gains from trade liberalization to materialize.

THE IMPACT OF TRADE LIBERALIZATION ON EMPLOYMENT AND WAGES: PANEL EVIDENCE FROM DEVELOPING COUNTRIES

Since the 1990s, developing countries shifted their trade policy from inward-oriented strategy to outward-oriented strategy because of the conditions imposed by international lending institutions for granting loans to developing countries. The current study aims to investigate the impact of trade liberalization on employment and wages within the 30 developing countries over the period 2000 to 2019. To investigate empirical connections between trade, employment and wages, reduced form equations of labor demand and wages have been devised. The study has applied Generalized Method of Moments estimation techniques to estimate labor demand and wage equations to tackle the problem of endogeneity. The empirical findings of the study predict that trade liberalization has significant adverse effect on both labor demand and wages. However, the magnitude of the influence of trade on both one is small. Similarly, wages, employment level, output and real exchange rate are affecting employment and wages significantly. While ILO ratifications are significant only when KOF trade globalization is used as measure of liberalization, and time trend is significant only when weighted tariff rate is used as a measure of liberalization. To craft a multilateral and effective policy development, both real output and workers’ skill should be the focus of economic managers of the developing economies to reap the benefits of trade liberalization.

Can trade liberalization promote green production? Evidence from China's manufacturing enterprises

Whether international trade causes environmental damage to developing countries has caused widespread concern. We estimate trade liberalization's impact on environmental performance using unique firm-level pollution data in China. By using maximum tariff rates from China's accession agreement as instrumental variables for actual tariff rates, we find that cuts in import tariffs enhance the average SO2 emission. Changes in the composition of products in the polluting and non-polluting industries can explain the substantial increase in the average SO2 emission. However, using multiple firm-level indicators, we demonstrate the existence of the trade-induced technique effect that trade liberalization can promote cleaner production.

Skill-biased Impact of Trade Liberalization on Employment in the manufacturing sector of Pakistan

This study explores the association between trade liberalization and skilled employment from 1990 to 2005. Our estimation approach analyzes how skilled employment is affected by the protection rate. Trade liberalization and skilled employment are associated. Liberalization has increased skilled employment in the manufacturing sector of Pakistan. The findings also indicated a significant link between skilled labor and lagged policy. The results are also robust after including the different trade-related variables. The policy insinuation is that the government should provide free education programs and technical packages in their economies to gain from the benefits of trade liberalization.

On the effects of trade on multidimensional deprivation: Evidence from Vietnam’s rice growing households

Welfare and poverty are multidimensional in nature. However, empirical research on the impacts of trade liberalisation on multidimensional welfare is rare. This paper provides one of the first empirical analyses of the impact of trade liberalisation on multidimensional deprivation of rice farmers utilising data from the six waves of the Vietnam Household Living Standard Surveys. Our empirical model captures the direct effects of incomes from farm and non-farm activities and indirect effects of employment, rice price levels, rice production and domestic trade. Results unveil several important new findings which have policy implications. A higher level of export openness is correlated with higher levels of income from farming and non-farm activities. Higher income levels appear to reduce multidimensional deprivation but working in export-oriented industries increases it. Farmers selling rice to domestic private traders generate higher income than those selling to government-owned trading companies. Regional farming productivity, the scale of rice production, crop diversification, and education help increase income and reduce deprivation.

Trade Liberalization and Manufacturing Sector Performance in Nigeria

This study examined the impact of trade liberalization on manufacturing sector performance in Nigeria from 1970 to 2018. A multiple regression model was developed to achieve the study’s objectives with real manufacturing growth rate (RMGR) as proxy for manufacturing sector performance. Import penetration, export penetration, dummy variable for structural adjustment programme alongside other control variables were used. Using the Autoregressive Distributed Lag (ARDL) bound testing for cointegration approach, it was found that all the variables for the model had long run relationship. Furthermore, the ARDL results revealed a mixed impact of trade liberalization on the performance of the manufacturing sector. Specifically, while trade liberalization exerted insignificant positive impact on RMGR in the short run, the impact was positive and statistically significant in the long run. Consequently, the study recommended policies that would encourage the importation of capital goods to enhance manufacturing productivity in Nigeria.