Trade Liberalization,Economic Growth And Poverty Reduction

Since the implementation of trade liberalization policies,it is evident that trade and foreign direct investment in Mali have grown dramatically.However,the country's trade structure has remained unchanged,dominated by a few primary commodities(gold,cotton,and livestock)for exports and manufactured products for imports.Economic growth has been volatile with a high positive rate in some years and even a negative rate in other years.Poverty has reduced,but more than 43 percent of the population still lives with less than USD1.9 a day in 2014.Moreover,Mali is one poorest country in the world with a GDP per capita of USD 745 and a rank of 182 out of the 189 countries in the 2017 UNDP Human Development Index.The relationship between trade,economic growth,and poverty reduction is today the most controversial topic.Although several theoretical and empirical studies,there is no consensus on the positive relationship and the direction of causality between them.In the case of Mali,existing empirical studies that were based on cross-countries examined their link separately and provided mixed results.Furthermore,the survey of their causal relationship is ignored in Mali.Therefore,this study aimed to fill this research gap and investigated the relationship between international trade,economic growth,and poverty reduction in Mali.Mainly,this study proposed to examine whether other complementary policies influence the relationship between trade liberalization,economic growth,and poverty reduction measured by three poverty reduction proxies(per capita consumption,infant mortality rate,and life expectancy).The ARDL(Auto-Regressive Distributed Lag)bounds testings approach is employed to examine the short-run and long-run impact of trade liberalization and economic growth on poverty reduction in the Malian economy over the period 1986-2018.After,the VECM Granger causality is conducted to examine the long-run and short-run causality between them.The results from the ARDL bounds test indicated that there is a negative relationship between trade liberalization and three proxies of poverty reduction in the long-run.However,it significantly only decreased per capita consumption.Yet,in the short-run,trade liberalization has a positive and significant effect on per capita consumption and life expectancy.In contrast,it has a negative and significant impact on the infant mortality rate.Economic growth has been pro-poor in both the long-run and short-run;its effect on infant mortality is meaningful only in the long-run because of the high population rate in the short-run.The VECM Granger causality test indicated that in the long-run,there is only a direct relationship between trade liberalization and three poverty measures,while in the short-run,there is no direct or indirect relationship between trade liberalization and poverty whether the proxy used.Economic growth Granger causes per capita consumption and life expectancy in both the long-run and short-run,while Ganger causes infant mortality rate only in the long-run.In summary,our study stated that the impact of trade liberalization on poverty reduction is not sensitive to poverty proxies but depends on complementary policies.In the case of Mali,factors such as financial deepening,education,inflation,institutional quality,and infrastructure development seem to influence the relationship between trade liberalization,economic growth,and poverty reduction.In order to make openness more profitable in Mali,the government in implementing trade policy reform must also take account of all those factors.Our study made the following policy recommendations.The government of Mali should diversify its exports by increasing the number of export products and partners.Also,the government must add value to most of the primary commodities in which it has a comparative advantage.Therefore,the quality of education must be improved by increasing the number of schools,teachers,pre-and service teachers,and low skill labor training,particularly in rural areas.Through the private sector guarantee fund,access to medium and long-run credit must be improved,especially to poor people and small and medium enterprises.A massive investment must be made in the infrastructure sector(mainly road,railway,energy,telecommunication,water,slaughterhouse,and so on)in order to reduce transaction costs and improve export competitiveness.The quality of the institution must be improved through the fight of corruption and consolidation of democracy.Also,following Mauritius and Ethiopia,the export processing zone should be established to attract more foreign investment in low-skilled labor-intensive industries(such as textile and agro-business).Finally,regional integration policies should be pursued and strengthened by the government through regional infrastructure projects and standardization of border procedures.This is critical because,as a landlocked country,Mali requires secure access to ports and to quality port services in neighboring countries.