Trading for Sustainable Development Goals: Trade Policy, Inequality and Poverty in Emerging Economies

Abstract

Article HistoryReceived: 10 July JEL ClassificationO50; F63; F14.The objective of the study is to identify the impact of trade policy on two significant goals of sustainable development namely poverty and income inequality in the emerging economies. Using trade openness and trade facilitation as a measure of trade policy the study examines their impact on Gini coefficient and average income of the poorest quintile as a proxy to income inequality and poverty headcount ratio and poverty gap at $1.90 per day (2011 PPP) as indicators of extreme poverty. It applies dynamic panel data model with panel datasets over the period of 1986-2013 for trade openness and 2005-2013 for trade facilitation on the emerging economies based on the availability of data. The findings of the study suggest that trade openness and trade facilitation as measures of trade policy significantly reduce the extreme poverty as measured by poverty headcount ratio and poverty gap at $1.90 a day and increase the average per capita income of the lowest 20% population of the emerging economics whereas the two measures of trade policy increase the income inequality in these economies.

The Nexus Between Trade Liberalization and Poverty: A Disaggregated Analysis

“…The findings of empirical work show that trade liberalization reduces poverty significantly. Li, Islam, & Fatema (2017) explored the impact of trade openness on poverty and income inequality in developing countries using the period between 1986 and 2013 for analysis. This study used openness of trade and trade facilitation as indexes of trade policy.…”