Trade Openness: An Effective tool for Poverty Alleviation or an Instrument for Increasing Poverty Severity?

Several studies focus on the effects of trade openness on poverty alleviation through studying the effect on money-metric measures of poverty. Hence, they ignore the other dimensions of the individual’s well-being. Even those who studied the effect of money-metric poverty found that the ground argument that trade openness alleviates poverty in developing countries is fragile. Moreover, in most cases testing this relationship in developing countries resulted in a negative relationship. Most of the studies stressed the importance of mitigating the negative effects of trade openness on poverty in the short term. The main contribution of this paper is to add the non-money-metric measures of poverty in testing the impact of trade openness on both multidimensional poverty and its intensity. The paper has attempted to review the literature that supports and opposes the effects of trade openness on multi-dimensional poverty and its severity. Additionally, a dynamic panel model is estimated to test this relationship relying on macroeconomic data set for countries in MENA region. The paper supports that trade openness restricts the efforts to alleviate both multidimensional poverty and its intensity in MENA countries. This underscores the need for governments to provide complementary policies aimed at bringing the benefits of trade openness to those in extreme poverty.



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