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Trade Liberalization and Unemployment in India: A State Level Analysis

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  • Dhamija, Nidhi

Abstract

The study empirically examines the relationship between trade liberalization and unemployment for the Indian economy using data for Indian states (separately for rural and urban areas). This study provides support to the argument that effects of trade liberalization have been different for the states in India. The results find evidence for the negative relationship unemployment and trade openness. The relationship is significant for rural parts of the states which also drive results for the total state; though for urban part of the states, relationship is not found to be significant. The results also indicate that this effect is higher and stronger for more flexible states. The results hence, confirm to the theory that in developing countries trade openness leads to increase in the employment of labour; but more so of unskilled workers and leads to a movement away from the agriculture and hence rural sector of the economy. This is substantiated by internal migration trends for India which showed an increase in population mobility during post reform period. The data also corroborated the shift from rural agricultural to rural non-agricultural and urban sectors of the economy.

Suggested Citation

  • Dhamija, Nidhi, 2019. "Trade Liberalization and Unemployment in India: A State Level Analysis," MPRA Paper 95001, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95001
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    More about this item

    Keywords

    Trade Liberalization; Unemployment; Labour market institutions; Panel data;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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