Abstract:
This article analyzes the correlation between trade liberalization and
welfare in Pakistan from 1986 to 2015. Using consumption expenditure as a
measure of welfare, we estimate the relationship using a vector error correction
model. The empirical results show that trade liberalization does not have an
immediate correlation with welfare: it takes some time for liberalization policies to
enhance welfare. The findings also suggest that trade liberalization can help reduce
poverty, decrease inequality and increase enrollment levels in the long run. But in
the short run, trade liberalization has led to higher income inequality.
