The Impacts of Trade and Financial Liberalization on Income Inequality and Poverty in ASEAN Member States

Abstract

The objective of this paper is to assess the impacts of trade and financial liberalization on income inequality and poverty in the ASEAN member states. In order to do this, this paper conducts a panel data analysis using data spanning the years 1991-2014. I found that increased trade liberalization and increased financial liberalization through cross border portfolio investments are associated with decreases in income inequality, while increased financial liberalization through foreign direct investment is associated with increases in income inequality. Furthermore, I also found that increased trade liberalization and increased financial liberalization through foreign direct investment are associated with decreases in poverty. However, no distinct relationship was found between financial liberalization through cross border portfolio investments and poverty. Overall, the findings of this study also suggest that the impacts varied in magnitude between ASEAN members at different stages of development.