Trade Liberalization Research Articles

Is Keynesianism still increasingly relevant? The importance of the economic multiplier

Cyclically, the debate on Keynes’ economic policies reemerge. The economic impact of the pandemic caused by COVID-19 has relaunched the discussion about the importance of Keynesian policies, the multipliers effects, and their impact on stimulating economies. This paper aims to analyze the importance and relevance of the Keynesian multiplier before the pandemic, in a period without experiencing exceptional aggregate shocks. The main focus of the research is to examine the shortcomings of the public investment multiplier, which plays a central role in Keynesian theory. Despite the undeniable relevance of the concept, the issue is to understand the extent to which the multiplier is still relevant in specific contexts. The research presents empirical evidence which suggests that the effects of public investment depend on structural characteristics of economies specifically trade liberalization, the dimension of internal markets, the question of countries having the freedom to issue their currency, and the issue of currencies being accepted as an international reserve. A sample of 35 OECD countries was used for the period 2010–2018. The Keynesian public investment multiplier was calculated for several countries and the obtained values were related to various correlations carried out to assess the relationship between public investment, national income, and specific characteristics of the economies to which the multipliers are sensitive. The results obtained contrast in terms of short-term and long-term impacts so, is at least dubious, that one can rely on Keynesian public policies to boost economies at least in the absence of substantial shocks to aggregate demand.

Does import trade liberalization worsen residents’ health? Evidence from China

Health is important to human capital and national sustainable development. Based on the latest Chinese Family Panel Studies (CFPS), this paper uses the IVprobit model to test the impact of import trade liberalization on residents’ health from the micro-individual perspective and further explores its mechanism. The results indicate that import trade liberalization brings hidden health costs, and that the negative effects on the health of people in eastern China or rural areas, people with a low education background, people under 60 years of age, and women are more significant. In areas with more serious environmental pollution, the health deterioration effect of expanding imports is more obvious. Increasing green coverage and optimizing the quality of public services can effectively alleviate this negative impact. Import trade liberalization does not affect residents’ health through income gap, therefore when carrying out import trade liberalization the government should pay greater attention to the health status of the specified groups, adopt various means to improve the ecological and living environments, reduce pollution emissions, optimize the supply of public services, and ultimately improve residents’ overall health level.

Sovereign ESG and Foreign Direct Investment in the GCC: The Amplifying Role of Trade Openness in Economic Diversification

This study examines the relationship between Sovereign Environmental, Social, and Governance (SESG) initiatives and foreign direct investment (FDI) within the context of the Gulf Cooperation Council (GCC) countries from 2000 to 2022. The research explores how national ESG performance influences the attractiveness of these countries to foreign investors, with a particular focus on the moderating role of trade openness. Using a comprehensive panel data analysis, the study finds that strong SESG frameworks are positively correlated with higher FDI inflows, with trade openness amplifying the positive impact of SESG. Additionally, the use of Instrumental Variables (IV) estimation addresses endogeneity concerns, further confirming the robustness of the results. Moreover, the analysis reveals that trade openness amplifies the positive impact of SESG on FDI, suggesting that GCC countries with liberal trade policies and robust ESG practices are more successful in attracting sustainable and responsible investments. These findings contribute to the growing body of literature on ESG and FDI, offering valuable insights for policymakers seeking to enhance economic growth through strategic investments in sustainability and governance. The findings offer valuable insights for policymakers in aligning SESG frameworks with global ESG standards and leveraging global liquidity conditions to enhance FDI inflows, particularly in light of ongoing economic diversification efforts in the GCC.

Trade and inequality in an overlapping generations model with capital accumulation

AbstractWe study the lifecycle aspect of within‐country inequality that stems from capital and labor services supplied by individuals. Our environment is a combination of a multicountry trade model and an overlapping generations model with production and capital accumulation. Trade liberalization increases the measured total factor productivity in each country, which increases the marginal product of capital and incentivizes capital accumulation. Higher capital stock and higher measured productivity raise the marginal product of labor and, hence, wages. Inequality, measured by the ratio of old agents' income to young agents' income, evolves over time due to capital accumulation during the transition from autarky to an open‐economy world. Immediately after liberalization, inequality increases. Over time, capital accumulates at a diminishing rate and inequality declines.

Do Financial Liberalization and Gender Inequality Moderate Trade Liberalization’s Impact on Growth in European Transition Economies?

ABSTRACT We assess the influence of trade liberalization on economic growth in European transition economies from 2000 to 2022. Both trade and financial liberalization contribute to economic growth. Financial liberalization facilitates the movement of internal and external assets, and encourages cross-border investments, strengthening the relationship between trade liberalization and economic growth. Our results support the notion that negative side effects of liberalization are not observed in European transition economies. However, gender inequality dampens the positive effect of trade liberalization on economic growth. As gender inequality is a social factor affecting economic growth, meaningful policies are needed to reduce it.

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.

Preferential trade liberalization with endogenous cartel discipline: Implications for trade and welfare

AbstractWe consider an international cartel whose members interact repeatedly in their own as well as in third‐country markets. Cartel discipline—an inverse measure of the degree of competition between firms—is endogenously determined by the cartel's incentive compatibility constraint, which strategically links markets that are otherwise independent. This linkage implies that trade cost reductions induce cartel members to adjust their sales, not only because of direct but also because of spillover effects. We apply these ideas to preferential trade agreements and show that the indirect effects can give rise to trade diversion. We also characterize the welfare effects of preferential tariff cuts for all countries and identify circumstances under which preferential trade liberalization is welfare‐reducing.

Agricultural trade liberalization, governance quality, and technical efficiency in the agricultural sector of Southeast Asia

International trade has been regarded as an essential factor in enhancing a country's productivity and efficiency. Nevertheless, developing countries squander money and resources as a result of their deficient institutional quality, impeding their ability to profit from specialization and trade. Therefore, this study intends to investigate the impact of agricultural trade liberalization and governance quality on technical efficiency in Southeast Asia's agricultural sector using balanced panel data spanning from 2002 to 2021. The research utilizes translog stochastic frontier analysis (SFA) with a single-stage maximum likelihood estimation (MLE) to simultaneously calculate the time-varying technical efficiency scores and explore the core factors influencing agricultural inefficiency. The findings reveal that the average output-oriented technical efficiency for ASEAN-8 countries was 94 %. This suggests that there is significant potential to enhance technical efficiency in agricultural production by up to 6 % by addressing the adverse impacts of technical inefficiency. The research findings further point out that Malaysia is the most technically efficient country, having a technical efficiency score of 99.82 %, followed by Vietnam (99.75 %), Thailand (99.70 %), Lao PDR (98.90 %), Myanmar (95.42 %), Indonesia (91.64 %), the Philippines (90.65 %), and Cambodia (76.11 %). The results of disaggregated agricultural trade liberalization demonstrate a significant reduction in agricultural inefficiency in Southeast Asia through agricultural exports and imports. The findings also emphasize that improvements in the rule of law positively contribute to agricultural efficiency, whereas enhancements in terms of voice and accountability and regulatory quality appear to reduce it. Based on these findings, the government should consider enlarging open and liberalized trade policies in order to facilitate the exchange of technology and knowledge within the agriculture sector. Additionally, the government should involve farmers, agricultural cooperatives, local communities, and other relevant stakeholders in the decision-making process to ensure that policies address the specific needs and constraints faced by the sector.

Economic Decisions and Cultural Trauma: A Sociological Exploration of Macro-level Policies and Societal Perceptions

The article delves into the intricate relationship between macroeconomic policies and cultural trauma. It argues that economic decisions, typically confined to corporate and legislative realms, significantly impact communities by shaping collective memories, identities, and psychological distress. The study highlights historical events like The Great Depression and the COVID-19 pandemic, underscoring their transformative impacts on societal consciousness and cultural narratives. The article emphasizes the role of macroeconomic choices, such as fiscal policies and trade agreements, in creating collective experiences that transcend economic outcomes. Using examples like trade liberalization in Brazil, it demonstrates how economic policies can lead to diverse societal perceptions and narratives. The article also examines the role of media, public discourse, and societal leaders in shaping public perceptions of these decisions. Central to the study are the contributions of cultural sociologists like Jeffrey C. Alexander, who propose that cultural trauma arises more from societal narratives around an event rather than the event itself. The study stresses the need for a comprehensive approach that integrates economic analysis with sociological insights, highlighting the importance of understanding economic decisions beyond their immediate financial implications. Conclusively, the article posits that macroeconomic decisions have profound and lasting impacts on societies, influencing collective identities and memories. It advocates for policies and scholarly approaches that acknowledge the broader societal ramifications of these decisions.

Sustainable development in African countries: evidence from the impacts of education and poverty ratio

This paper uses the autoregressive-distributed lag model to investigate the effects of education, poverty, trade volume, ICT development, and GDP per capita on sustainability in the 15 largest African economies from 1999 to 2019. The results show a positive correlation between higher tertiary education rates and sustainability, emphasizing the importance of investing in education for sustainable development. In contrast, higher poverty rates are linked to lower sustainability, highlighting the need for poverty reduction efforts. Increased trade volumes are associated with reduced sustainability, indicating the challenges of trade liberalization policies in achieving sustainability goals. However, ICT development has a significant positive impact on sustainability. Interestingly, higher GDP per capita is linked to lower sustainability, potentially due to unsustainable consumption patterns and social inequalities. Policy recommendations for promoting sustainable development in African countries include targeted measures focusing on education and poverty reduction. Gender-friendly policies and initiatives to eliminate educational disparities, especially among marginalized groups, can enhance human capital development. Additionally, promoting e-businesses and sustainable entrepreneurship, along with attracting foreign investment for sustainable education and employment initiatives, can drive economic growth while minimizing environmental impact and fostering inclusive development.

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.

Blood Avocados? Trade Liberalization and Cartel Violence in Mexico

Blood Avocados? Trade Liberalization and Cartel Violence in Mexico

EXAMINING THE RELATIONSHIP BETWEEN TRADE OPENNESS AND ECONOMIC GROWTH IN ALGERIA USING SELF-REGRESSION OF DISTRIBUTED SLOWDOWN PERIODS (ARDL) DURING THE PERIOD 1980-2022

Objective: This research paper aims to try to measure the impact of trade openness on economic growth in Algeria during the period 1980-2022, and in order to achieve the objectives of the study, the standard approach was used through the use of the autoregressive model for distributed slowdown periods (ARDL) As for the study data, it was obtained from the World Bank Group of Statistics 2024. Theoretical Framework: The study relies on an attempt to familiarize himself with the various theoretical literature that analyzed the relationship between foreign trade liberalization and economic growth theoretically, in addition to trying to highlight previous applied studies that examined the relationship between these two variables, which we divided into studies that denied and studies that proved a relationship between economic growth and foreign trade liberalization. Method: the research is devoted to studying the relationship between economic growth and trade openness in Algeria during the period 2000-2022 in order to assert the type of relationship between the two variables. Result and discussion: The results of the study revealed a positive impact of trade openness on economic growth represented by GDP, in addition to the existence of a long-term equilibrium relationship between the variables of the study. Research Implication: The study of the subject of trade openness as a mechanism to achieve economic growth aims to understand the mechanisms of economic growth associated with the liberalization of foreign trade, analyze the effects of openness on the volume of trade exchange, exports and imports, and identify the factors affecting the achievement of economic growth through trade liberalization. As for Algeria the liberalization of foreign trade can drive economic development, improve the livelihood of the population, raise levels of economic performance and improve the quality of domestic goods that are forced to compete with sophisticated foreign goods. Originality/Value: This study analyzes the economic effects of foreign trade liberalization on economic growth in Algeria while trying to separate the results of previous studies applied to the Algerian economy on the nature of the actual relationship between these two variables.

Транстихоокеанское партнерство и всестороннее региональное экономическое партнерство как международно-правовая модель экономической интеграции в Азиатско-Тихоокеанском регионе

The article explores international law aspects of the contemporary integration processes in the Asia-Pacific with a specific focus on such relatively new formationsas the Trans-Pacific Partnership (TPP) and the Regional Comprehensive Economic Partnership (RCEP). Based on the WTO law provisions with regard to the free trade areas for goods and services, both Partnerships significantly widen the scope of regulated inter-governmental relationships, which allows considering the TPP and the RCEP as a fundamentally new form of the regional trade agreements. Having a fixed number of participating states and a system of institution with their functions and competencies, the Partnerships do not represent inter-governmental organizations and are vested with no legal capacity or, especially, supranational powers. However, this does not undermine the trade and economic significance of the Partnerships while also making them an attractive model of the soft integration structure between the states having different level of economic development, located in different geographical regions and bound with their own integration obligations under bi- and multilateral (subregional) trade agreements. The founding agreements of the Partnerships are typical “WTO plus” arrangements combining the provisions on liberalization of trade in goods and services with the parties’ mutual obligations in the fields of investments, sustainable development, competition, administrative and legal cooperation. At the same time, applicability of parallel bi- and multilateral trade agreements between the Asia-Pacific states, including those within ASEAN, forms a complex multilayer regulation of foreign trade and entails a risk of legal uncertainty for economic operators.

Assessing the impact of the European Union-Vietnam free trade agreement on labor market and employment in Vietnam

PurposeThis study investigates the impact of the European Union-Vietnam Free Trade Agreement (EVFTA) on Vietnam’s labor market and employment outcomes, considering the potential distributional consequences across various groups of workers and regions.Design/methodology/approachA comprehensive quantitative framework is employed, combining the gravity model of trade to estimate the EVFTA’s effects on trade flows, the CISAF_M1 model to simulate sectoral employment impacts and econometric models to analyze the effects on wages and decent work. The analysis draws upon a rich dataset spanning the period before and after the EVFTA’s implementation.FindingsThe EVFTA has significantly boosted Vietnam’s exports to the EU, leading to substantial job creation in labor-intensive sectors such as textiles, apparel and footwear. The agreement has also contributed to wage growth and improved access to social insurance for workers in export-oriented industries. However, the impact on other aspects of job quality is less clear. The distributional analysis reveals that the EVFTA’s employment effects have been relatively balanced across gender but have favored younger and less skilled workers as well as those in rural areas.Originality/valueThis study provides a comprehensive and nuanced assessment of the EVFTA’s impact on Vietnam’s labor market, addressing a gap in the literature on the employment effects of new-generation free trade agreements in developing countries. The findings highlight the importance of considering distributional aspects when evaluating the socioeconomic implications of trade liberalization and offer valuable insights for policymakers aiming to promote inclusive growth in the context of deepening international economic integration.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-03-2024-0236

Firm specifics, trade liberalization outcomes, and export intensity with the moderating role of location advantages—Empirical evidence from Vietnam

Firm specifics, trade liberalization outcomes, and export intensity with the moderating role of location advantages—Empirical evidence from Vietnam

Impact of urbanization, economic growth, FDI, and trade openness on energy demand in Ireland: An ARDL approach

Abstract This research study uses an autoregressive distributed lag (ARDL) paradigm to examine the effects of trade openness, urbanization, economic growth, and foreign direct investment (FDI) on energy demand in Ireland. This thorough theoretical framework anticipates a relationship between energy demand and trade, foreign direct investment, and urbanization. This study demonstrates both short- and long-run cointegration among the variables employing an ARDL (autoregressive distributed lag) bounds-testing method for the data set period from 1972 to 2021. Additionally, Fully Modified Ordinary Least Square (FMOLS), Dynamic Ordinary Least Square (DOLS), and Canonical Cointegrating Regression (CCR) were utilized in the study to verify the results' robustness. Nonetheless, this analysis discovers that trade openness and rising GDP (Gross Domestic Product) per capita increase energy consumption. The results show that for every 1% increase in GDP, energy consumption increases by 0.967%. On the flip side, energy consumption in Ireland is declining due to increased urbanization and foreign direct investment. The results show that for every 1% increase in urbanization, energy usage decreases by 1.738%. The investigation shows that Ireland's energy usage is strongly impacted by trade liberalization, FDI, urbanization, and economic expansion. Findings like these can help policymakers and stakeholders manage and optimize energy usage in the context of urbanization, economic expansion, foreign direct investment, and global trade. The report recommends sustainable energy planning and policy initiatives to strike a healthy balance between meeting the increasing demand for energy and protecting the environment.

Mexico's Minimum Wage Data: Trends, Policies, and a Research Agenda

The decline of the real value of the minimum wage amid trade liberalization in Mexico has raised concerns about its policy effectiveness and unintended consequences. The literature has examined the impact of minimum wage adjustments on employment levels, worker earnings, poverty, and inequality. However, findings from different sample periods and regions still need to be reconciled. It is necessary to understand the mechanisms connecting minimum wage to other market components. This research note first explores Mexico’s minimum wage data from 1980 to 2023 to grasp its spatial and temporal trends. We then discuss several future research directions to explore mechanisms through which minimum wage potentially works, including the welfare effect of the policy, the informal sector, and interactions between different policy tools.

The impacts of the intended transition of Pakistan from geo-politics to geo-economics

This research explores the implications of Pakistan's intended transition from geo-politics to geo-economics on its foreign policy, analysing the shift through the lens of neoliberalism. The study investigates the economic realignments, foreign policy strategies, and impacts on security and defence posture post-transition. Employing qualitative analysis of policy documents, trade agreements, and economic indicators, the research provides a comprehensive understanding of the dynamics at play. Key findings reveal that Pakistan's geo-economic reorientation has been driven by factors such as globalization, regional integration, and economic diplomacy. Pakistan pursued a more balanced foreign policy, seeking to expand its strategic interests through economic partnerships. Economic reforms have been central to this shift, including privatisation, investment facilitation, and trade liberalisation. However, the transition has also highlighted challenges such as uneven economic growth, dependence on foreign capital, and balancing economic objectives with security concerns. The research concludes that Pakistan's foreign policy has evolved from a traditional geopolitical focus to a more economically oriented approach. While the transition has presented opportunities for growth and development, it has also necessitated a reassessment of security strategies and balancing economic and political objectives. Understanding these dynamics is crucial for navigating the complex geopolitical landscape and achieving sustainable regional development.

The pro‐competitive effects of indirect export exposures: Evidence from China

AbstractUsing China's accession to WTO in 2001 as an episode for trade liberalisation, this paper empirically investigates whether export expansions affect firms' markup adjustments through local production networks. Following Helm (2020), we construct an indirect local export exposure measure to capture the degree to which firms in each prefecture‐industry cell are indirectly affected by export expansions of other local industries. To analyse the role played by local production networks, we further decompose indirect export shocks into upstream and downstream shocks. Combining this with markups estimated following De Loecker et al. (2016), our empirical results suggest that the average level of indirect export shocks would lead to a 0.363 decrease in markups. This magnitude accounts for 6.862% of overall markup changes during 2000–2007. In particular, the baseline results are driven by local indirect shocks from downstream industries. Further empirical analysis shows that reductions in firms' markups are induced by increased competition, which can be summarised as the “indirect pro‐competitive effects”. Further analysis at the prefecture‐industry level reveals that the impact mainly exists at the within‐firm margin, not at the between‐firm, or entry/exit margin.