Effects of trade on employment creation and human development in developed and developing countries
Trade, employment creation, and human development are the three major areas in the economic growth, wealth and prosperity of a country. Trade has played an increasing role in the world economy over the past decades. In both developed and developing countries, trade has created employment and h...
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| Format: | Thesis |
| Language: | English |
| Published: |
2013
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| Subjects: | |
| Online Access: | http://psasir.upm.edu.my/id/eprint/68350/1/FEP%202013%2017%20ir.pdf |
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| Summary: | Trade, employment creation, and human development are the three major areas in the
economic growth, wealth and prosperity of a country. Trade has played an increasing
role in the world economy over the past decades. In both developed and developing
countries, trade has created employment and higher incomes for millions.
Simultaneously, many people have yet to benefit. According to UNDP (2006), trade can
definitely enhance human development. Human development is a process of enlarging
people's choices. It puts the importance on the three essentials for people; to lead a long
and healthy life, to obtain knowledge, and to have right to use resources needed for a
decent standard of living and their environment. If these essential choices are not
offered, many other opportunities remain inaccessible. The Human Development Index
(HDI) has become a standard for measuring human development. Its component indices
measure life expectancy, literacy and education, and GDP per capita.
The purpose of this study is to examine the effect of trade on employment creation,
human development, health, and education in developed and developing countries.
Firstly, for the effect of trade on employment creation, this study explores whether
improvement in trade in developed and developing countries can create or destroy
employments. Secondly, for the impact of trade on human development, this study seeks
to address does trade affect human development or not. Moreover, this study attempts to
evaluate which channels such as, income, employment, or institutional quality, might
influence human development. Furthermore, in studying the effect of trade on health
and education, this study examines whether the improvement in trade has a good or bad
effect on health and education. A systematic empirical study based on the Generalized
Method of Moments (GMM) has been undertaken by this study. In the first issue, this
study concentrates on the time frame from year 1980 to 2009 of 81 countries; 30
developed countries and 51 developing countries. In the other two issues, this study
focuses on the time frame from year 1980 to 2007 with 90 countries; 32 and 58
countries from developed and developing countries, respectively.
The results in the first issue clearly indicate that total trade which consists of exports
and imports is insignificant in promoting employment creation for developing countries. However, the export equation found a positive effect of export on
employment creation in developing countries. Nevertheless, the import equation
suggests a negative effect of import on employment creation in developed countries.
On the other hand, the empirical results for the effect of trade on human development
demonstrate that total trade does not affect human development. The employment
channel results found a positive role in influencing the effect of total trade on human
development in developed countries. Overall, for the three channels such as income,
employment, and institutions, improvement in total trade does not influence human
development for developing countries. The results for the last issue evidently indicate
that total trade has a negative effect on health in developing countries. Furthermore, the
trade and education results indicate that total trade does not influence education.
The empirical result states that export is statistically a significant determinant for the
employment creation in developing countries, whereas import is statistically a
significant determinant of employment creation in developed countries. Furthermore,
the empirical result also shows that employment channel is statistically a significant
determinant for the human development in developed countries. Hence, trade should be
emphasized if employment creation and human development are to be considered as
valid policy objective. Specifically, to create employment, the main policy should focus
on both the improvement of exports in developing countries. At the same time, the
developed countries need to produce and remain goods and services for the domestic
purposes particularly for the industries which have comparative advantage in their
productions. As to improve the human development, the policy should concentrate on
both formal and informal education such as learning and upgrading skills respectively. |
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