Trade Liberalization, Inequality, and Poverty A Brief Note

Abstract

This paper examines the relationship between globalization, trade liberalization, income inequality, and poverty, emphasizing the conceptual and empirical challenges in identifying clear causal links. While inequality within many countries has risen in recent decades, evidence on global inequality trends remains inconclusive, with some findings suggesting a decline driven by growth in large developing economies. The paper reviews theoretical predictions and empirical studies on how trade openness affects wages, employment, and income distribution. It argues that the distributional effects of trade reforms depend heavily on country-specific conditions, including labor market structures, technological change, sectoral protection patterns, and institutional capacity. The study concludes that trade liberalization combined with other domestic policies determine inequality or poverty outcomes and its social impact.