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Does Foreign Trade Liberalization Reduce Poverty in Turkey

01 Mar 2016-Vol. 3, Iss: 1, pp 157-173
TL;DR: In this article, the effects of liberalization of foreign trade on poverty and carry out analysis on Turkey were studied. But, the main question is with what way the outward oriented government policies applied will provide the maximum benefit in reducing poverty and what should be done to intensify poverty, while the anti-liberalist views suggest that liberalization will damage to poor peoples from many aspects.
Abstract: (ProQuest: ... denotes formulae omitted.)1. INTRODUCTIONLiberalization of trade expresses the process of removing the direct and indirect barriers in front of international trade, increase in the foreign trade volume, foreign direct investments, and becoming widespread of transnational economic activities and multinational companies. This process is associated with becoming easier and cheaper of communication activities, changes in working conditions and, moreover, cultural change.In the form supporting the theory of classical economics foreseeing that economies, with opening to foreign countries, will reach higher production and consumption level, while liberalization paves the way for rapid growth in economic meaning, increasing the vulnerability of countries, it brought together with it the negative effects on poverty (Yanar and Sahbaz, 2013:5). According to the classical approach, liberalization of trade makes contribution to economic growth through factor prices. Developing countries are rich from economic point of view. Therefore, it is expected that free trade leads to higher wages. This situation leads poverty to decrease. However, it was seen that unqualified labor force remained the poorest. For example, while the wages of workers graduated from primary school rise with liberalization of trade, the wages of illiterate workers decrease (Winter, 2000: 32). In a large part of the world in less developed feature, besides liberalization of trade, as a result of financial integration that rapidly increases in especially 1990s, sensitivity and vulnerability against crises increased and crises caused a serious impoverishment. Increase of poverty in the world in absolute meaning and not being able to be corrected of income distribution among and within countries increased the worries and criticisms about liberalization Danisoglu, 2008:11).The subject matter of this study is to study the effects of liberalization of foreign trade on poverty and carry out analysis on Turkey. In the first part of study, the theoretical framework of the relationship between opening to foreign countries and poverty was examined In the part of application of study, emphasizing datasets and econometric method to be applied, model prediction and the results obtained will be evaluated. In the section of Conclusion, the findings obtained and policy suggestion will be discussed.2. THEORETICAL FRAMEWORKThere is a close relationship between foreign trade and development. In the departments of economics, that economic development and international economics are under the same scientific branch shows that this interaction is so important. Although the subject of liberalization of foreign trade is discussed from many aspects, it is generally expressed that it plays a little role in struggle against poverty. Liberalization of trade provides many resources for coping with poverty and generally makes an influence through income distribution. For average income to increase, liberalization may be an indirect role. However, in a situation that is necessary to be known, most foreign trade reforms will absolutely injure somebody, leave them in a difficult position, or deepen poverty Even if while some reforms also increases national income in society, they may lead poverty to increase. Therefore, although the general opinion is open for liberalization of trade, the primary question is with what way the outward oriented government policies applied will provide the maximum benefit in reducing poverty and what should be done to intensify poverty (Mcculloch et al, 2001:22).The anti - liberalist views suggest that liberalization will damage to poor peoples from many aspects. For example due to the fact that trade reforms made in the developing countries and flexibility in wage decrease and that intersectorial labor force mobility are limited, they put forward that it will increase the poverty in the short term.Liberalization of trade reduces the demand to skillful labor force at the expense of unskilled one and, thus, disturbing income distribution, increases poverty. …
Citations
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Journal Article
TL;DR: In this article, the authors analyzed the dynamic impact of international trade openness on poverty in Indonesia and found that in short run, trade openness does not have any significant impact on poverty, but in long run, it has significant impact in reducing poverty.
Abstract: This research aims to analyze the dynamic impact of international trade openness on poverty in Indonesia. Previous research shows different effects in every country. The data used are export import value, GDP, income per capita, open unemployment rate, and poverty rate during 1978-2015. VECM analysis shows that in short run, trade openness does not have any significant impact on poverty. However, in long run, it has significant impact in reducing poverty. IRF analysis concludes that poverty rate gave a positive response in the first two years, but negative in the third to every trade openness variable shock. Poverty rate shows the biggest negative response in the fifth year. According to FEVD analysis, trade openness does not give big contribution in affecting poverty rate during the first three years, but starts to show effect in the following seven, with the biggest in the ninth year. Keywords: Trade openness, poverty, VECM JEL Classifications: C10, F14, I32

10 citations


Cites background or result from "Does Foreign Trade Liberalization R..."

  • ...The impact of trade openness in decreasing the poverty was proved by the researches of Ozcan and Kar (2016), Okungbowa and Eburajolo (2014), Oyewale and Amusat (2013), and Fischer (2003) who found that trade openness was able to push the economic growth and decrease the poverty in the world....

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  • ...Ozcan and Kar (2016) conducted a research on the impact of trade liberalization on poverty in Turkey....

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  • ...Ozcan and Kar (2016), Okungbowa and Eburajolo (2014), Oyewale and Amusat (2013), and Fischer (2003) also gave the same conclusion....

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Journal ArticleDOI
TL;DR: In this article , the impact of trade liberalization on the poverty level in Pakistan was investigated using the feasible generalized least squares (FGLS) model in panel setting to address the problem of heteroskedasticity.
Abstract: Decades after trade liberalization, poverty among the developing countries has continued to rise as their economies adjust to fierce and increasing external competition. This study investigates the impact of the 1988 trade reforms on poverty in Pakistan using micro-level data from 1990 to 2005. Using the feasible generalized least squares (FGLS) model in panel setting to address the problem of heteroskedasticity, we explored the impact of trade liberalization on the poverty level in Pakistan. The findings reveal that reductions in import tariffs have increased Pakistan’s level of poverty. Our findings are robust and impervious to different poverty measures (i.e., headcount ratio, poverty gap, and squared poverty gap). Also, it was observed that lagged trade policies are associated with poverty in Pakistan. The rise in poverty may be attributed to the lower participation of the poor in external markets. It is recommended that policymakers enact policies that will encourage poor people to participate in external markets if they wish to benefit from trade liberalization.

2 citations

TL;DR: In this paper , the authors looked at how trade openness affected the lowering of poverty in Nigeria from 1986 to 2020 and concluded that making trade more open over time has not made people more productive.
Abstract: This study looked at how trade openness affected the lowering of poverty in Nigeria from 1986 to 2020. The Central Bank of Nigeria Statistical Bulletin and the World Bank's Development Indicators were used to get data for the study. For the basic test, the study uses the Augmented Dickey Fuller unit root test. For the analysis, the study uses the Johansen Cointegration test and the Ordinary Least Square (OLS) method. The facts show that trade openness has had a big effect on the reduction of poverty in Nigeria and that this effect is currently bad. This study comes to the conclusion that making trade more open over time has not made people more productive. The study suggests, among other things, that the government should start important trade reforms which can boost domestic production, especially in agriculture, where we have a comparative advantage. This can be done by giving subsidies and tax breaks to industries and farmers who make goods that are being imported, so they can increase their production capacity to meet rising demand in the economy and export surplus.
References
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Book ChapterDOI
01 Jan 2001
TL;DR: In this article, it is shown that the cross spectrum between two variables can be decomposed into two parts, each relating to a single causal arm of a feedback situation, and measures of causal lag and causal strength can then be constructed.
Abstract: There occurs on some occasions a difficulty in deciding the direction of causality between two related variables and also whether or not feedback is occurring. Testable definitions of causality and feedback are proposed and illustrated by use of simple two-variable models. The important problem of apparent instantaneous causality is discussed and it is suggested that the problem often arises due to slowness in recordhag information or because a sufficiently wide class of possible causal variables has not been used. It can be shown that the cross spectrum between two variables can be decomposed into two parts, each relating to a single causal arm of a feedback situation. Measures of causal lag and causal strength can then be constructed. A generalization of this result with the partial cross spectrum is suggested.The object of this paper is to throw light on the relationships between certain classes of econometric models involving feedback and the functions arising in spectral analysis, particularly the cross spectrum and the partial cross spectrum. Causality and feedback are here defined in an explicit and testable fashion. It is shown that in the two-variable case the feedback mechanism can be broken down into two causal relations and that the cross spectrum can be considered as the sum of two cross spectra, each closely connected with one of the causations. The next three sections of the paper briefly introduce those aspects of spectral methods, model building, and causality which are required later. Section IV presents the results for the two-variable case and Section V generalizes these results for three variables.

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"Does Foreign Trade Liberalization R..." refers background or methods in this paper

  • ...Fır the direction of causality between two variables to be able to be empirically tested, there are various causality tests (Geweke et al 1983; Granger, 1969; Sims, 1972)....

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TL;DR: In this article, the authors present an alternative solution method for Deterministic Processes by iteratively solving homogeneous difference equation and finding particular solutions for deterministic processes, and conclude that the proposed solution is the best solution.
Abstract: PREFACE. ABOUT THE AUTHOR. Chapter DIFFERENCE EQUATIONS . 1 Time-Series Models. 2 Difference Equations and Their Solutions. 3 Solution by Iteration. 4 An Alternative Solution Methodology. 5 The Cobweb Model. 6 Solving Homogeneous Difference Equations. 7 Finding Particular Solutions for Deterministic Processes. 8 The Method of Undetermined Coefficients. 9 Lag Operators. Summary and Conclusions. Questions and Exercises. Endnotes. Appendix 1 Imaginary Roots and de Moivre's Theorem. Appendix 2 Characteristic Roots in Higher-Order Equations. Chapter 2 STATIONARY TIME-SERIES MODELS . 1 Stochastic Difference Equation Models. 2 ARMA Models. 3 Stationarity. 4 Stationarity Restrictions for an ARMA(p, q) Model. 5 The Autocorrelation Function. 6 The Partial Autocorrelation Function. 7 Sample Autocorrelations of Stationary Series. 8 Box-Jenkins Model Selection. 9 Properties of Forecasts. 10 A Model of the Interest Rate Spread. 11 Seasonality. 12 Parameter Instability and Structural Change. Summary and Conclusions. Questions and Exercises. Endnotes. Appendix 1 Estimation of an MA(1) Process. Appendix 2 Model Selection Criteria. Chapter 3 MODELING VOLATILITY . 1 Economic Time Series The Stylized Facts. 2 ARCH Processes. 3 ARCH and GARCH Estimates of Inflation. 4 Two Examples of GARCH Models. 5 A GARCH Model of Risk. 6 The ARCH-M Model. 7 Additional Properties of GARCH Processes. 8 Maximum Likelihood Estimation of GARCH Models. 9 Other Models of Conditional Variance. 10 Estimating the NYSE International 100 Index. 11 Multivariate GARCH. Summary and Conclusions. Questions and Exercises. Endnotes. Appendix 1 Multivariate GARCH Models. Chapter 4 MODELS WITH TREND . 1 Deterministic and Stochastic Trends. 2 Removing the Trend. 3 Unit Roots and Regression Residuals. 4 The Monte Carlo Method. 5 Dickey-Fuller Tests. 6 Examples of the ADF Test. 7 Extensions of the Dickey-Fuller Test. 8 Structural Change. 9 Power and the Deterministic Regressors. 10 Tests with More Power. 11 Panel Unit Root Tests. 12 Trends and Univariate Decompositions. Summary and Conclusions. Questions and Exercises. Endnotes. Appendix 1 The Bootstrap. Chapter 5 MULTIEQUATION TIME-SERIES MODELS . 1 Intervention Analysis. 2 Transfer Function Models. 3 Estimating a Transfer Function. 4 Limits to Structural Multivariate Estimation. 5 Introduction to VAR Analysis. 6 Estimation and Identification. 7 The Impulse Response Function. 8 Testing Hypothesis. 9 Example of a Simple VAR Terrorism and Tourism in Spain. 10 Structural VARs. 11 Examples of Structural Decompositions. 12 The Blanchard and Quah Decomposition. 13 Decomposing Real and Nominal Exchange Rate Movements An Example. Summary and Conclusions. Questions and Exercises. Endnotes. Chapter 6 COINTEGRATION AND ERROR-CORRECTION MODELS . 1 Linear Combinations of Integrated Variables. 2 Cointegration and Common Trends. 3 Cointegration and Error Correction. 4 Testing for Cointegration The Engle-Granger Methodology. 5 Illustrating the Engle-Granger Methodology. 6 Cointegration and Purchasing-Power Parity. 7 Characteristic Roots, Rank, and Cointegration. 8 Hypothesis Testing. 9 Illustrating the Johansen Methodology. 10 Error-Correction and ADL Tests. 11 Comparing the Three Methods. Summary and Conclusions. Questions and Exercises. Endnotes. Appendix 1 Characteristic Roots Stability and Rank. Appendix 2 Inference on a Cointegrating Vector. Chapter 7 NONLINEAR TIME-SERIES MODELS . 1 Linear Versus Nonlinear Adjustment. 2 Simple Extensions of the ARMA Model. 3 Regime Switching Models. 4 Testing For Nonlinearity. 5 Estimates of Regime Switching Models. 6 Generalized Impulse Responses and Forecasting. 7 Unit Roots and Nonlinearity. Summary and Conclusions. Questions and Exercises. Endnotes. STATISTICAL TABLES. A. Empirical Cumulative Distributions of the tau. B. Empirical Distribution of PHI . C. Critical Values for the Engle-Granger Cointegration Test. D. Residual Based Cointegration Test with I (1) and I (2) Variables. E. Empirical Distributions of the lambda max and lambda trace Statistics. F. Critical Values for beta 1 = 0 in the Error-correction Model. G. Critical Values for Threshold Unit Roots. REFERENCES. SUBJECT INDEX.

6,373 citations


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TL;DR: In this paper, it is pointed out that it is very common to see reported in applied econometric literature time series regression equations with an apparently high degree of fit, as measured by the coefficient of multiple correlation R2 or the corrected coefficient R2, but with an extremely low value for the Durbin-Watson statistic.

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TL;DR: In this article, a new data set on inequality in the distribution of income is presented, and the authors explain the criteria they applied in selecting data on Gini coefficients and on individual quintile groups' income shares.
Abstract: This article presents a new data set on inequality in the distribution of income. The authors explain the criteria they applied in selecting data on Gini coefficients and on individual quintile groups' income shares. Comparison of the new data set with existing compilations reveals that the data assembled here represent an improvement in quality and a significant expansion in coverage, although differences in the definition of the underlying data might still affect intertemporal and international comparability. Based on this new data set, the authors do not find a systematic link between growth and changes in aggregate inequality. They do find a strong positive relationship between growth and reduction of poverty.

2,637 citations


"Does Foreign Trade Liberalization R..." refers background in this paper

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TL;DR: In this paper, a model of repeated product improvements in a continuum of sectors is developed, where each product follows a stochastic progression up a quality ladder, and the rate of aggregate growth is constant.
Abstract: We develop a model of repeated product improvements in a continuum of sectors. Each product follows a stochastic progression up a quality ladder. Progress is not uniform across sectors, so an equilibrium distribution of qualities evolves over time. But the rate of aggregate growth is constant. The growth rate responds to profit incentives in the R&D sector. We explore the welfare properties of our model. Then we relate our approach to an alternative one that views product innovation as a process of generating an ever expanding range of horizontally differentiated products. Finally, we apply the model to issues of resource accumulation and international trade.

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