Mufti Alam Adha, Faiza Husnayeni Nahar, Muhammad Azizurrohman


Nowadays, trade liberalization is considered as development strategy policy to increase economic growth and reduce poverty in many countries, particularly in developing countries. It is reported that Indonesia has been actively joining many trade agreements in order to ease the distribution of goods and services to other countries. Hence, this study analyses the impact of trade liberalization on poverty reduction by using an Ordinary Least Square (OLS) method from 1984 to 2017. The Trade Openness Ratio (TOR) is used as a dependent variable in order to measure trade liberalization. Other variables such as GDP, exchange rate and labor force are considered as control variables. The empirical result shows that TOR and labor force have a positive impact on poverty, whereas GDP and exchange rate have a negative impact. This finding is different with previous researches, particularly where trade liberalization has been negatively affecting poverty. Such a result is justifiable because Indonesian firms are not ready to compete with foreign firms where high competitiveness exist.



Trade Liberalization; Indonesia; GDP; Exchange Rate; Labor Force

Full Text:



Bhasin, V.K, and Annim, S. K. (2005). Impact of Elimination of Trade Taxes on Poverty and Income Distribution in Ghana. Global Development Network.

Cockburn, J., Decaluwé, B., and Robichaud, V. (2006). Trade liberalization and poverty: Lessons from Asia and Africa. Poverty and Economic Policy, Micro Impact of Macro and Adjustment Policies (MIMAP) Project, (April).

Cockburn, J., Decaluwe, B., and Robichaud, V. (2008). Trade Liberalization and Poverty: A CGE Analysis of the 1990s Experience in Africa and Asia. Poverty and Economic Policy (PEP) Research Network.

David, H.L. (2007). A Guide to Measures of Trade Openness and Policy. Retrieved February 22, 2013.

Eaton, J. and Grossman, G.M. (1986). Optimal trade and industrial policy under oli-gopoly. The Quarterly Journal of Econom-ics, 101(2), 383-406.

Feridhanusetyawan, T., and Pangestu, M. (2003). Indonesian Trade Liberalization: Estimating The Gains. Journal-Bulletin of Indonesian Economic Studies, 39(1), 1–33.

Goffa, M.L., and Singh, R.J. (2014). Does Trade Reduce Poverty? A View from Africa. Journal of African Trade, 1(1), 5–14.

Gujarati. (2004). Based Econometric, 4th Ed. New York: McGraw-Hill Companies.

Harrison, A. (2007). Trade liberalization, poverty and inequality: Evidence from Indian districts. Chicago: University of Chicago Press. Available from (Accessed: 1st, August 2018).

Hayashikawa, M. (2009). Trading Out of Poverty: How to Aid for Trade can Help. OECD Journal on Development, 10(2), 1–38.

Kis-Katos, K., and Sparrow, R. (2013). Poverty, Labour Markets and Trade Liberalization in Indonesia. The Institute for the Study of Labor Discussion Paper, 7645, 1–32.

Levin, J., and Ohlin, M. (2008). Trade Policies and Export Growth: Employment and Poverty Impact in Tanzania. SIDA, Swedish International Development Cooperation Agency, Oct 2008.

McCulloch, N., Winters, L.A., and Cirera, X. (2001). Trade Liberalization and Poverty: A Handbook. Centre for Economic Policy Research. London, UK: DFID Department for International Development.

Nahar, F.H., Adha, M.A., and Azizurrohman, M. (2018). Effects of Remittances on Economic Growth in Indonesia. In 9th International Conference on Socio-economic and Environmental Issues in Development, 1, 11–20.

Nahar, F. H., and Arshad, M.N.M. (2017). Effects of Remittances on Poverty Reduction: The Case of Indonesia. Journal of Indonesian Economy and Business, 32(3), 163–177.

Romer, M. and Gugerty, M. (1997). Do Economic Growth Reduce Poverty ? Technical Paper, 1–33.

Snyder, S., and Chern, W.S. (2008). The Impact of Remittance Income on Rural Households in China. Journal of Socio-Economics, 1(1), 38–57.

Topalova, P. (2007). 'Trade liberalization, poverty and inequality: Evidence from Indian districts' in A Harrison, (ed), Globalization and poverty 1–46. Chicago: University of Chicago Press. Available from (Accessed: 1st August 2018).

Winters, L.A. (2000). Trade Liberalisation and Poverty. DFID, 1–42.

Winters, L.A., McCulloch, N., and McKay, A. (2004). Trade Liberalization and Poverty: The Evidence So Far. Journal of Economic Literature, 42(1), 72–115.


Article Metrics

Abstract view : 40 times
PDF - 14 times


  • There are currently no refbacks.


Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
WA: +628112638191

Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution 4.0 International License.