Poverty and trade liberalization: empirical evidence from 21 African countries

The study investigated the possible nexus between trade liberalization and poverty in 21 African countries covering the period 2005-2014. The study deployed the following econometric tests: descriptive statistics; the correlation matrix and variance inflator; the panel unit root test; the pooled OLS technique; and the panel co-integration test (Johansen co-integration test). In order to confirm the robustness and validity of the regression model result, Ramsey RESET, cross dependence, autocorrelation and heteroscedasticity tests were conducted. The findings reveal that foreign direct investment and inflation rate had a positive relationship with the human development index while exchange rates and trade openness were negatively related to poverty level at the 5 percent level. The study recommended urgent policy measures aimed at revamping the poverty alleviation programmes. The study recommended that in a bid to diversify export market, developing countries should target other developing countries in the spirit of South-South cooperation. Such countries should also consider the joining or strengthening of regional economic integration. Incentives for production and human capacity building in the export-oriented sector should be emplaced. Social and economic policies are required to protect any country against the adverse effects of lowered trade barriers.