*Names in bold indicate Presenter
From a public policy perspective, to have causal interpretation of impact of free trade reform on countries economy, it is important to analyze the impact of free trade within the context of poverty, unemployment and social well being etc. While significant studies support a positive correlation between trade liberalization and country’s GDP and economic growth, few scholars have explored the impact of trade openness within the context of social issues such as unemployment. Despite the adoption of the trade openness policy by approximately more than two third of the developing and under developing countries, the question evaluating the impact of trade openness on social issues such as unemployment remains unresolved by previous literature.
This paper uses a unique panel dataset spanning 18 years for 26 developing countries to determine the relationship between national level unemployment rate and trade liberalization and GDP. The dataset was constructed using information from United Nations (UN) database, International Labor Organization (ILO), World Trade Organization, World Bank, National Bureau of Economic Research and national government websites of 26 developing countries. A country and year fixed model were estimated. The primary results indicate a complicated story between unemployment rate and trade openness. To gain deeper insight into the nature of relationship, two sectors namely agriculture and manufacturing specific models were estimated. Interestingly, manufacturing sector trade openness showed a negative relationship to unemployment rate, and whereas in trade openness in agriculture sector showed a positive relationship. Overall, the results indicate that unemployment rate differs based on the sector and the degree of trade openness.