Trade Liberalization And Poverty Essay

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Trade liberalization has been touted by western institutions as essential for the stability of advanced economies, and as a panacea to the developing countries’ development needs. For instance, Goldstein, Rivers, and Tomz (2007) suggest trade liberalization was not only beneficial to advanced economies, but it also benefits all states, including developing nations, many of which today argue that they have gained little from it (Goldstein, Rivers and Tomz 2007, 39). As well, Oatley (2012) argues that majority of countries believe that they are better off with trade liberalization than without it, nonetheless, like all political systems, organization of international trade “reflects the interests of the powerful” (Oatley 2012, 43). While …show more content…
In one of the systematic studies, Reuveny and Li (2003) explored the relationship between economic openness, democracy and inequality (Reuveny & Li, 2003). Using a country decade as a unit of analysis and a sample of 69 countries, and timeframe from 1960 to 1996, the authors find that “trade reduce income inequality, foreign direct investments increase income inequality, and financial capital does not affect income inequality” (Reuveny & Li, 2003, p. 575). Reuveny and Li’s research reveal that “effect of trade openness on income inequality is negative and statistically significant at the 5% level for all the samples, indicating that trade openness reduces income inequality” (Reuveny & Li, 2003, p. 588). Beer and Boswell (2001) also studied the effects of economic globalization on inequality (Beer & Boswell, 2001). This research stipulates the underlying circumstances under which transnational corporate infiltration and other global influences effect variations in income distribution domestically. The finding is a strong indication that countries extreme reliant on “foreign capital experience high and worsening income inequality” (Beer & Boswell, 2001). As Heinemann (2000) shows, more globalized countries have lower increases in government outlays and taxes (Heinemann & Friedrich,

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