Nexus Between Trade Liberalization and Unemployment: An Investigation in the Context of Pakistan

Abstract

Economic vulnerabilities such as unemployment, inflation intensify downward trends of economic and productive activities in the economies. Economic theories are evident that trade improves social and economic conditions in a country through creating employment opportunities, increasinghuman capital, specialization of labour, improvements in living standard of people. Being an important component of growth, trade is always one of the glitters in development for the policy formulators. In Pakistan, policy makers introduced trade reforms in 1989 with the intention to open the doors of progress and to narrow down economic hazards. The objective of this study is to capture the impact of trade openness (proxy of trade liberalization) on unemployment in Pakistan. Using time series data for the period 1995 to 2015, we have applied ARDL to Cointegration approach. Trade liberalization has negative and significant impact on unemployment. Government may play a role to improve trade sector which has significant impact in reducing unemployment.