Poverty-the Mystery Of Trade

While trade liberalization is being encouraged as an important factor in developmental strategies,theoretically the impact of trade liberalization on poverty is debatable.Some academicians argue that more liberalized trade can make changes in the relative factor prices in term of the more abundant factor.According to this idea,more liberalized trade policies are in the favor of poor,as it reduces poverty.Although should the re-allocation of factors be hindered,the anticipated gains from the openness of trade may not be appear.The empirical literature in the area shows apparently,the theoretical ambiguity on the poverty-trade relationship.The paper attempt to resolve the issue by examining whether the effect of liberalized trade policies differ with some characteristics of selected countries.Furthermore,we investigate relationship of dependent variable(Poverty Headcount Ratio)over independent variables,while choosing some of them as control variables1.The study uses a panel of selected Asian Countries data over the past period of 1999-2014 and testing for non-linearity in the poverty-trade relationship.Moreover,panel data regression technique is carry out to examine the fixed effect and then introduce interacting terms to allow the relationship with country characteristics.The results enlighten some interesting facts;greater trade is associated with higher levels of poverty;however,this adverse relation could be reversed if financial development grows,spending on human capital increases and GDP per capita rises.