Academic journal article Journal of Economic and Social Development

Does Foreign Trade Liberalization Reduce Poverty in Turkey?

Academic journal article Journal of Economic and Social Development

Does Foreign Trade Liberalization Reduce Poverty in Turkey?

Article excerpt

(ProQuest: ... denotes formulae omitted.)


Liberalization 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.


There 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. …

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