Trade Liberalisation and Poverty Reduction: A Systematic Literature Review

This study explores the relationship between trade liberalisation and poverty reduction in developing countries. Advocates argue that increased trade liberalisation can drive economic growth, create employment opportunities, and improve living standards for the poor. However, critics express concerns about potential negative consequences, such as increased income inequality and job losses. The study aims to answer three key questions: 1) To what extent does trade liberalisation contribute to poverty reduction? 2) What are the specific channels through which trade liberalisation influences poverty reduction? 3) What are the differential impacts across regions and countries? Analysing 86 empirical studies from 2001 to 2022, this paper conducts a systematic literature review using the PRISMA methodology. Findings reveal a nuanced relationship between trade liberalisation and poverty reduction, identifying channels such as economic growth, employment effects, increased exports, enhanced productivity, and income level impacts. The differential impacts across diverse regions, including Africa, Asia, and South America, underscore the need for tailored, context-specific policies considering specific circumstances, economic structures, and governance factors. The findings contribute to ongoing policy debates, guiding policymakers toward inclusive strategies for sustainable poverty reduction in developing countries.