Date of Award
Spring 5-1-2026
Document Type
Thesis
Degree Name
Bachelor of Arts (BA)
Department
Economics
First Advisor
Monica Das
Abstract
This paper examines whether trade liberalization has led to inclusive growth in three major emerging economies, India, China, and Indonesia over the period 1978-2023. The central question is whether economic growth translates into poverty reduction uniformly, or whether this relationship is conditioned by inequality. While a large body of literature emphasizes the role of growth in reducing poverty, and a parallel line of research highlights the importance of distributional dynamics, relatively few studies directly test how these mechanisms interact within a unified empirical framework.
Using a panel data and fixed effects estimation strategy, the paper models poverty as a function of GDP growth, inequality, and their interaction, alongside key macroeconomic controls including trade openness, inflation, foreign direct investment, capital formation, and education. The inclusion of the interaction term allows for a direct test of whether inequality systematically alters the marginal effect of growth on poverty.
The results provide mixed support for the conventional growth-poverty relationship. Inequality emerges as a strong and statistically significant determinant of poverty, while the interaction between growth and inequality is not statistically significant. This suggests limited empirical support for the claim that inequality consistently conditions the poverty reducing effect of growth. Furthermore, Figure D1 based on predicted margins with 95 percent confidence intervals indicates some variation across inequality groups, but these differences are not statistically robust.
Overall, this paper contributes to the literature by challenging the commonly assumed conditioning role of inequality in the growth and poverty relationship. Rather than acting as a consistent mediating mechanism, inequality appears to exert a stronger direct influence on poverty outcomes. As a result, inclusive growth cannot be achieved through growth alone, and distributional factors play a central role in shaping development outcomes.
Recommended Citation
Sehgal, Adya, "Trade Liberalization and Inclusive Growth in Emerging Asia (1978–2023): A Comparative Study of India, China, and Indonesia" (2026). Economics Student Theses and Capstone Projects. 193.
https://creativematter.skidmore.edu/econ_studt_schol/193