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Article
Publication date: 12 January 2015

Michael Enowbi Batuo and Simplice A. Asongu

The purpose of this paper is to investigate the impact of liberalisations policies on income inequality in African countries. Examining whether the liberalisations

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Abstract

Purpose

The purpose of this paper is to investigate the impact of liberalisations policies on income inequality in African countries. Examining whether the liberalisations policies have affected the income distribution of everyone equally or they only assist those who are already relatively well off; leaving the poor behind. The authors also examine how they affect income distribution in the various countries within the continent, and their effect on short and long runs?

Design/methodology/approach

First, The authors used the before and after comparison, to examine the response of the level of income inequality and the volatility of income inequality from the time that financial or trade liberalisations took place in each country. Next, the authors used the panel data techniques model for a sample of 26 African countries spanning the period 1996-2010 to investigate the effect of liberalisation policies on income distribution.

Findings

The authors find that financial liberalisation has a levitated income-redistributive effect with the magnitude of the de jure measure (KAOPEN) higher than that of the de facto measure (FDI); that exports, trade and “freedom to trade” have an equality incidence on income distribution; and that institutional and/or political liberalisation has a negative impact and; economic freedom has a negative income-redistributive effect, possibly because of the weight of its legal component.

Practical implications

In general, this study provides a variegated picture, findings tend to suggest that overall the reforms have increased income inequality in African countries. It would be risky to prescribe a general policy because of the diversity of the country. However, African countries’ better performance can be attributed to a combination of policies. For example avoiding the Marco price mixture of real exchange rate appreciation and high domestic interest rates; having capital controls and prudential financial regulations which would enable them to contain the negative consequence of capital flows; putting a system in place to direct export between African countries and encouraging sub regional integration agreement. The government should put in place countervailing social policies in order to withstand social coherence and smooth the adverse transition of liberalisation policies.

Originality/value

Three main elements of originality clearly standout: first, the estimation approach used in the paper considers both short- and long-run effects of in empirical strategy; second, an exhaustive plethora of liberalisation policies (trade, financial, political and institutional are considered); and third, recent data are used to appraise second generation reforms for more updated policy implications.

Details

Journal of Economic Studies, vol. 42 no. 1
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 22 September 2021

Sena Kimm Gnangnon

This study investigates the effect of multilateral trade liberalization on services export diversification with a view to complementing the recently published work on the…

Abstract

Purpose

This study investigates the effect of multilateral trade liberalization on services export diversification with a view to complementing the recently published work on the effect of multilateral trade liberalization on export product diversification.

Design/methodology/approach

The empirical exercise been performed using a panel dataset of 133 countries over the period 1995–2014.

Findings

The findings show that multilateral trade liberalization is associated with greater services export diversification in both developed and developing countries alike. This is particularly the case in countries with a high reliance on manufactured goods exports or those that enjoy greater export product diversification. Interestingly, multilateral trade liberalization enhances services export diversification in countries that experience higher foreign direct investment inflows.

Research limitations/implications

These findings highlight the importance of multilateral trade liberalization for services export diversification. The study has considered explicitly supply-side factors that could affect services export diversification. This is because the indicator of multilateral trade liberalization is highly correlated with some demand-side factors, such as the world demand for services exports. Therefore, another avenue for future research could involve looking at the demand side factors that could influence services export diversification, and whether the degree of multilateral trade liberalization matters for the influence of these demand factors on services export diversification.

Practical implications

The current study through its positive effect on both export product diversification and services export diversification, greater cooperation among World Trade Organization (WTO) Members on trade matters could help revive economic growth, particularly in the current COVID-19 pandemic that has significantly plummeted it.

Originality/value

To the best of our knowledge, this is first study that has investigated this issue.

Details

Journal of Economic Studies, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 12 April 2011

Camara Kwasi Obeng, William Gabriel Brafu‐Insaidoo and Ferdinand Ahiakpor

The purpose of the paper is to investigate the quantitative effect of import liberalization on tariff revenue in Ghana.

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Abstract

Purpose

The purpose of the paper is to investigate the quantitative effect of import liberalization on tariff revenue in Ghana.

Design/methodology/approach

In an attempt to achieve the objective of the paper, a robust decomposition analytical approach was used to examine how different components of the sources of change in import tax contribute to changes in import tax revenue in Ghana.

Findings

The paper concludes that Ghana suffered some revenue loss from the liberalization by reducing the level of average official duty rates, but gained in revenue as a result of real currency depreciation.

Practical implications

It has been suggested that public policy should aim at determining and targeting the optimum level of the average official import duty rates, focus on the identification of the major sources of duty revenue leakage, and substitute sales taxes for tariffs to improve tax revenue sufficiently.

Originality/value

This paper makes explicit the contribution of alternative import policy features to changes in import tax revenue in Ghana.

Details

African Journal of Economic and Management Studies, vol. 2 no. 1
Type: Research Article
ISSN: 2040-0705

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Article
Publication date: 4 December 2017

Athula Naranpanawa and Jayatilleke Bandara

There is a large body of literature on the link between trade liberalisation, growth and poverty. However, less attention has been paid to the relationship between trade

Abstract

Purpose

There is a large body of literature on the link between trade liberalisation, growth and poverty. However, less attention has been paid to the relationship between trade and regional disparities. The purpose of this paper is to identify and quantify the regional impacts of trade liberalisation, particularly in the war-affected regions and to understand to what extent trade reforms can contribute to the post-war recovery process and long-term economic and political stability in Sri Lanka.

Design/methodology/approach

The authors developed a single country multi-regional computable general equilibrium (CGE) model for the Sri Lankan economy to meet the need for a detailed country study as emphasised in the recent literature.

Findings

Both short-run and long-run results suggest that all regions including war-affected regions in the country gain from trade liberalisation, although gains are uneven across regions. Furthermore, the results suggest that war-affected regions gain more relative to some other regions in the long run.

Originality/value

According to the best of the authors’ knowledge within country regional impact of trade liberalisation using a multi-regional CGE model has never been attempted for Sri Lanka. The results of this study, even though based on Sri Lankan data, will be relevant to other developing countries engulfed in internal conflicts with regional economic disparities.

Details

International Journal of Social Economics, vol. 44 no. 12
Type: Research Article
ISSN: 0306-8293

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Article
Publication date: 12 September 2016

Namsuk Choi

The purpose of this paper is to examine the effects of foreign trade liberalization and trade reforms on the process of structural upgrading, and explore the extent to…

Abstract

Purpose

The purpose of this paper is to examine the effects of foreign trade liberalization and trade reforms on the process of structural upgrading, and explore the extent to which they provide impetus for exports.

Design/methodology/approach

This paper accounts for trade liberalization dates, cumulative years in open regime, and the density of 1,006 products in the patterns of comparative advantage for 132 countries from 1975 to 2000. The effects of trade liberalizations and trade reforms in open regime on future export performance are estimated by using various empirical strategies.

Findings

This paper finds that the speed of moving from simple poor-country goods to rich-country goods in export depends not only on having a route to nearby goods of increasingly higher value, but also on the increase in the cumulative years in open regime. In particular, a 1 percent change in the relatedness across products with trade reform in open regime increases the probability of exporting a new product by 2.0 percent more.

Originality/value

A contribution of this paper is that it measures the extent to which trade reform in open regime affects the evolution of comparative advantage, even after taking account of the role of relatedness of exported products as in the Hausmann and Klinger (2006, 2007). In this paper, empirical findings of a comprehensive product level cross-country time-series data analysis may contribute to generalize the role of trade reform on structural upgrading not only for a pro-competitive export country like Korea but also for a typical developing country.

Details

Journal of Korea Trade, vol. 20 no. 3
Type: Research Article
ISSN: 1229-828X

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Article
Publication date: 4 March 2019

Sena Kimm Gnangnon

The purpose of this paper is to examine the impact of multilateral trade policy (MTP) liberalization on developing countries’ economic exposure to shocks.

Abstract

Purpose

The purpose of this paper is to examine the impact of multilateral trade policy (MTP) liberalization on developing countries’ economic exposure to shocks.

Design/methodology/approach

The analysis is conducted on a panel data set comprising 120 countries over the period 1996–2013 and uses the within fixed effects estimator.

Findings

The empirical results suggest that over the entire sample as well as sub-samples of least developed countries (LDCs) and non-LDCs, multilateral trade liberalization have a negative and significant impact on economic exposure to shocks. Interestingly, LDCs appear to experience the highest magnitude of the reducing impact of multilateral trade liberalization on countries’ economic exposure to shocks.

Research limitations/implications

These findings suggest that a greater cooperation among countries in the world, including among WTO members to further liberalize trade would surely contribute to reducing developing countries’ economic exposure to shocks.

Practical implications

The current study shows that the current backlash against trade and the consequent strong appeal for domestic trade protectionist measures would likely to undermine the likelihood of further multilateral trade liberalization. One implication of this could be a rise in countries’ economic exposure to shocks.

Originality/value

To the best of the author’s knowledge, this is first the study on this matter.

Details

Journal of Economic Studies, vol. 46 no. 2
Type: Research Article
ISSN: 0144-3585

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Article
Publication date: 2 October 2017

Rana Muhammad Adeel-Farooq, Nor Aznin Abu Bakar and Jimoh Olajide Raji

The purpose of this paper is to empirically examine the effects of financial liberalization and trade openness on the economic growth of two countries, namely, Pakistan…

Abstract

Purpose

The purpose of this paper is to empirically examine the effects of financial liberalization and trade openness on the economic growth of two countries, namely, Pakistan and India for the period 1985-2014.

Design/methodology/approach

This study uses the autoregressive distributed lag technique, which allows mixed order of integration. In addition, it uses the principal component method to create an index for financial liberalization to examine how it affects the economic growth of the selected countries.

Findings

The findings reveal that in the short and long run, trade openness has positive effect on the Pakistan’s economic growth while the financial liberalization has positive impact only in the long run. In the case of India, both financial liberalization and trade openness positively and significantly influence the economic growth in the short and long run.

Practical implications

By comparing the results of both countries, trade openness and financial liberalization increase the economic growth of India more than that of Pakistan. These results suggest that Pakistan should consider appropriate positive policies regarding financial liberalization and trade openness to achieve high and stable economic growth in the future.

Originality/value

This study creates financial liberalization index by using the principal component analysis method to explain the role of financial liberalization in the economic growth of Pakistan and India. In addition, it makes comparison of the results based on which country benefits most from the liberalization of trade and financial sectors. Only very few studies have examined these countries, yet their results have remained inconclusive as well.

Details

South Asian Journal of Business Studies, vol. 6 no. 3
Type: Research Article
ISSN: 2398-628X

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Article
Publication date: 11 July 2018

Jun Wang and Yong Hu

The purpose of this paper is to investigate how trade liberalization influences rural poverty reduction in China.

Abstract

Purpose

The purpose of this paper is to investigate how trade liberalization influences rural poverty reduction in China.

Design/methodology/approach

The authors make use of China Family Panel Studies survey data, take annual income of farmers of RMB2,300 and RMB3,450 as the poverty lines (poverty line 1 and poverty line 2, respectively). Residents below poverty line 1 and poverty line 2 are 2,580 and 2,661, respectively. Probit model is used to estimate the impact of trade liberalization on the poverty probability. Income-deciding equation is used to estimate the impact of trade liberalization on the income level of poor residents in rural areas. Income-deciding equation is also used to examine the transmission mechanism of trade liberalization affecting rural poverty.

Findings

This study finds that trade liberalization can reduce the poverty probability of rural residents and promote the income growth of poor residents in rural areas. Trade liberalization increases the income of poor residents and reduces poverty through transmission mechanisms such as promoting economic growth and financial expenditure.

Originality/value

To the authors’ knowledge, this is the first empirical study to quantitatively model the impact of trade liberalization on rural poverty reduction in China using residents’ survey data.

Details

China Agricultural Economic Review, vol. 10 no. 4
Type: Research Article
ISSN: 1756-137X

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Article
Publication date: 5 June 2019

Sena Kimm Gnangnon

The purpose of this study is to examine empirically whether the impact of multilateral trade liberalization on export performance and export performance convergence in…

Abstract

Purpose

The purpose of this study is to examine empirically whether the impact of multilateral trade liberalization on export performance and export performance convergence in developing countries depends on the amount of Aid for Trade (AfT) flows that accrue to these countries. Export performance is measured by export of goods and services to gross domestic product ratio, whereas export performance convergence refers to the process whereby a developing country’s export performance catches up with the world’s average export performance.

Design/methodology/approach

The analysis has used an unbalanced panel data set covering a sample of 97 developing countries, over the period 2002 to 2015. The two-step system generalized methods of moments has been used to address the question empirically.

Findings

Empirical results show that multilateral trade liberalization generates higher export performance and convergence in export performance in developing countries only when it is accompanied by higher AfT flows to developing countries, with a view of helping these countries enhance their trade capacity and reap the opportunities offered by multilateral trade liberalization in the international trade market.

Research limitations/implications

These findings indicate that greater access to the international trade market is not sufficient to promote developing countries’ export performance and convergence in export performance. Such a promotion could materialize if multilateral trade liberalization is accompanied by higher AfT flows (to enhance these countries’ capacity to trade). The findings therefore indicate that the current context of escalation of trade tensions would likely result in lower degree of multilateral trade liberalization, and eventually lower AfT flows to recipient-countries, and ultimately hamper developing countries’ export performance and convergence in export performance.

Practical implications

The findings therefore indicate that the current context of escalation of trade tensions would likely result in lower degree of multilateral trade liberalization, and eventually lower AfT flows to recipient-countries, and ultimately hamper developing countries’ export performance and convergence in export performance. An avenue for future research could be to perform the same analysis when data would be available over a longer time period. Future studies on the matter could also investigate whether the findings obtained apply to components of export performance, including for example manufactured exports and non-manufactured exports.

Originality/value

Many papers related to the AfT effectiveness have looked at the effect of AfT inflows on recipient-countries’ export performance. However, little attention has been paid to the effect of multilateral trade liberalization on developing countries’ export performance and export performance convergence and particularly to whether this effect would depend on the amounts of AfT that would accrue to developing countries to help them develop their trade capacity. To the best of our knowledge, no previous paper has addressed this issue.

Details

Review of International Business and Strategy, vol. 29 no. 2
Type: Research Article
ISSN: 2059-6014

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Article
Publication date: 9 September 2014

Shujaat Abbas

This paper aims to investigate the impact of trade liberalization on economic growth of selected developing and least developed economies by augmenting standard production…

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1950

Abstract

Purpose

This paper aims to investigate the impact of trade liberalization on economic growth of selected developing and least developed economies by augmenting standard production function.

Design/methodology/approach

The panel fixed effect model is used to estimate impacts of macroeconomic variables on economic growth. Real GDP million US$ is taken as proxy for economic growth. The capital stock series for each cross-section is generated from gross fixed capital formation. The total trade to GDP is taken as proxy for trade liberalization.

Findings

The result shows significant positive impact of selected macroeconomic variables on economic growth, except trade liberalization index. The one unit increase in trade liberalization deteriorates economic growth, of developing countries by −280.86 million US$ and least developing by −3555.09 million US$.

Research limitations/implications

The significant negative impact indicates the relatively greater share of import than exports. The developing nations should develop production side and adopt export promotion policies besides managing imports for the achievement of sustainable growth.

Originality/value

This study uses augmented production function and constructed capital stock for individual countries. The total trade to GDP is taken as index for trade liberalization and was found to have significant negative impact.

Details

Journal of International Trade Law and Policy, vol. 13 no. 3
Type: Research Article
ISSN: 1477-0024

Keywords

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