BUFT Journal of Fashion and Technology

Relationship and Causality between Technology-intensive Trade and Poverty –A Panel ARDL and Granger Causality based Analysis

University of Dhaka, Bangladesh
Email: mmislam@du.ac.bd

Abstract

Purpose: The purpose of this study is to identify whether trade in different sectorsclassified based on technology intensity has differential effects on poverty inemerging economies. The study classified trade into high technology (HT), mediumtechnology (MT), low technology (LT), and periphery products using classifiedtrade data collected from the UNcomtrade database. The study then examinedwhether the relationship and causality between trade in different sectors and povertyvary.Methodology: The study applies a panel ARDL model to identify the long-termand short-term between trade in different sectors and poverty as well as the VECMbased Granger causality approach to find out the direction of causality between thevariables.Findings: The results of the study support the view that the relationships andcausality between technology-intensive trade compositions and poverty differacross measures of poverty and country groups. Trade-in any sector substantiallyraises the average income of the poorest quintile both in low growth and highgrowth developing countries but they have a differential effect on extreme povertymeasured by poverty HCR in different countries.Limitations: The major limitation of the study is the unavailability of trade data.The trade data for emerging countries is not available for a long time and there areproblems with missing data. Moreover, poverty and income data are not alsoavailable. Due to the unavailability of data, the study excludes some emergingcountries from the analysis.Practical Implication: The results of the study would help to identify the effects oftrade on alleviating poverty and formulate trade policies that would be pro-poor.The study also opens a new window for trade-poverty linkage research.Originality: This study is one of the unique approaches to look into thetrade-poverty nexus from a different point of view. The results of the study evidencethat trade in different sectors affects countries' poverty differently and thus urgeresearch in this field in a broader scope.