This document analyzes the impact of trade liberalization on poverty in Pakistan. It discusses different types of poverty and provides statistics on poverty levels in Pakistan. The study aims to analyze the relationship between trade liberalization and poverty. It selects poverty as the dependent variable and trade liberalization, inflation, and GDP per capita as independent variables. The methodology includes stationarity testing, ARDL modeling, and Granger causality testing. The results find that trade liberalization and GDP per capita are negatively related to poverty, while inflation is positively related. The study concludes that increasing trade openness and GDP per capita while reducing inflation can help alleviate poverty in Pakistan.

1. IMPACT OF TRADE LIBERALIZATION
ON POVERTY IN PAKISTAN

2. INTRODUCTION
• The aim of every nation is to keep happy its people. The citizens of
a country will be pleased and satisfied if their basic necessities will
be fulfilled by their government.
• The responsibility of every government is to provide shelter,
clothing and food to the needy people of the country.
• The phenomenon where a person is unable to meet its essential
needs is known as poverty.
• It has been argued that poverty frequently lies in the
nonappearance of chance, empowerment and defense, and not
just the nonattendance of provisions on the table (Chaudhry, Malik
& Ashraf, 2006).

3. There are two main types of
poverty which are as
follows:
• Absolute Poverty
• Relative Poverty
TYPES OF POVERTY

4. POVERTY IN PAKISTAN
As Pakistan is also a developing country, it has also the same
severity of poverty.
• It has the population around 155 million and it is growing at 1.9% per
anumm.
• From the total population, almost 60% are living in rural areas and
majority of these people are poor.
• In the rural areas of Pakistan, poverty is completely uncontrollable.
• The poor people are having many issues and not having basic
necessities.
• They are in the position of insufficiency with respect to their wages,
clothing, shelter, educational and health facilities

5. • Trade Liberalization is the
situation which allows trade
with different nations or
countries and also there are
no restrictions or barriers
imposed to trade. Trade acts
as a fundamental factor in
shaping the development
process of any state
TRADE LIBERALIZATION

6. POVERTY AND TRADE
LIBERALIZATION…
• In Pakistan it is seen that in the presence of more trade openness,
there is less poverty in the country.
• Poverty was 23.35 percent when trade openness was 35.5942
percent in 2008 but poverty increased and went to 35 percent
when trade openness was decreased to 32.0718 percent in the
year 2009.
• This much increase in just one year shows that trade liberalization
or free trade is an important factor which contributes in decreasing
poverty (Pervez & Rizvi, 2014).

7. Continue…
Problem Statement
What is the impact of trade liberalization on poverty in Pakistan?
Objective of the study
To study the relationship between trade liberalization and poverty in Pakistan.
Hypothesis
H0: There is no significant relationship between trade liberalization and poverty.
H1: There is a significant relationship between trade liberalization and poverty.

8. LITERATURE REVIEW
• Pervez and Rizvi (2014) studied the impact of
inflation on poverty reduction in Pakistan
• Pradhan and Mahesh (2014) studied the impact of
trade openness on poverty reduction in the
developing countries
• Shamim et al. (2014) investigated the impact of
foreign direct investment on poverty reduction

9. • Collection of data
• Nature of the study
• Software
Variable Selection Criteria
• Poverty (dependent)
• Trade Liberalization(independent)
• Gross Domestic Product per
capita (independent)
• Inflation(independent)
RESEARCH METHODOLOGY

10. THEORETICAL FRAMEWORK
VARIABLE JUSTIFICATION
1. Trade Opennesss
2. Inflation

11. MODEL SPECIFICATION
Y= f (Trade openness, Inflation, and GDP per capita)
Y= α0+β1X1 +β2X2 +β3X3+µ
α0= Intercept
Y= Poverty Headcount Ratio
X1= Trade openness
X2= Inflation
X3= GDP per capita

12. METHODOLOGY
• Stationarity of the variables have been examined
through Augmented Dickey Fuller test (ADF)
• Auto-regression distributed lag model (ARDL)
has been used to determine the relationship
between the dependent variable and
independent variables

13. RESULTS AND INTERPRETATION
Decision Rule for stationarity
• H0: It is non stationary.
• H1: It is stationary.

14. MODEL SUMMARY
Short-run Results
Interpretation:
R-squared is 0.847 which means that the 84.7% variation
in the dependent variable is explained by the explanatory
variables in the model which can also be stated as 84.7%
of the change in the poverty in Pakistan is bring by trade
liberalization, inflation and GDP per capita.
R-squared
0.847

15. BOUND TESTS
H0: There is no co-integration.
H1: There is co-integration.
Decision
Calculated value of F-statistics is 3.889. F-statistics is greater than upper
bound so we reject H0 which means there is co-integration which means that
there is long-term relationship between the variables.
Calculated Value Critical lower bound Critical Upper Bound
3.889 2.72 3.77

16. HYPOTHESIS TESTING
Table long-run results
Trade Openness
H0: There is no significant relationship between trade liberalization and poverty.
H1: There is a significant relationship between trade liberalization and poverty.
Inflation
H0: There is no significant relationship between inflation and poverty.
H1: There is a significant relationship between inflation and poverty.
GDP Per Capita
H0: There is no significant relationship between GDP per capita and poverty.
H1: There is a significant relationship between GDP per capita and poverty.
Variable name Coefficient Probability Conclusion
Trade Openness -1.852155 0.002 Reject H0
Inflation CPI 0.7969057 0.022 Reject H0
GDP Per Capita -0.0095927 0.026 Reject H0

17. Durbin Watson test
Decision
As Durbin Watson is 1.89 which is closer to 2
which mean that there is no autocorrelation in the
model.
Durbin Watson
1.896757

18. MULTICOLLINEARITY TEST
Interpretation:
As the values are less than 0.7, it is concluded that there is no multicollinearity in the model.
Trade
Liberalization
Inflation CPI GDP Per Capita
Trade
Liberalization
1.00
Inflation CPI 0.4836 1.00
GDP Per Capita -0.4302 0.2103 1.00

19. CUSUM TEST
Interpretation
Figure shows that the data is stable and it occurs between the boundaries which show that it was never hit by some shocks
in the previous time period

20. CONCLUSION
• The results reveal that trade liberalization and GDP per capita has a negative
relation on poverty level whereas inflation is positively determining the poverty in
Pakistan
• When there is more easy access to trade without any restriction, there will be more
growth which in result alleviates poverty from Pakistan.
• GDP per capita is influencing poverty in a negative way that it increases the
purchasing power of people hence increase welfare in the economy.
• Inflation brings the poverty to upper level in the country as it declines the real
income of individuals.
• It is very important for the government of Pakistan to take steps to reduce poverty
by making such policies which enhance trade openness and GDP per capita and
reduce inflation.

21. LIMITATIONS
• Time constraint was present. If more time was
given then more detailed analysis could be
done.
• The data of all the variables was difficult to find.

22. RECOMENDATIONS
• Tariff rates and other restrictions on those goods which are
necessary for a nation should be reduced in order to
enhance growth and reduce poverty from Pakistan.
• Government should stabilize the prices of goods in a
country so that there will be lesser inflation.
• Government should formulate such policies which
enhance GDP per capita in Pakistan so that the
purchasing power of citizens will improve which lead to
lesser poverty.

23. THANK YOU!