Saudi Journal of Economics and Finance (SJEF)
Volume-8 | Issue-07 | 237-242
Review Article
Trade Liberalization, Employment and Income in India: A Cointegration Study
Dr. P. Abdul Kareem
Published : July 29, 2024
Abstract
The transformation of trade sector into an important economic sector over a long period is one of the features of economic reforms initiated in India since 1991. The economic reform measures have resulted in very high and continuous performance of sector in the country over a long period. The degree and magnitude trade openness measured as export + import/GDP remains very significant particularly since 1991. This fantastic performance of trade sector has many implications on macro economy in India. The economies of large-scale production and economic linkages owing to trade reforms have resulted in development of industrial economy, service sector, technology development, and high skilled employment and income levels. Higher trade openness over a long period obviously affected employment scenario in the country. The development of export and import have provided large employment opportunities. This is an important achievement considering the large employment market in the country. Consequently, the income levels of the people are also increased. This study has measured the co-integration between trade openness, employment and income levels using the econometric methodology. The estimations of the co-integration show that variables such as trade openness, employment and income are co-integrated and statistically significant. We have estimated Dickey Fuller test to know whether variables are stationary. Then, Johansen tests for cointegration between trade openness and employment estimated. Similarly, Johansen test for cointegration between trade openness and income estimated. The Engle-Granger test estimated. Then Vector Error Correction Model (VECM) is measured. The results of these tests show that trade openness and employment are cointegrated and statistically significant. Similarly, trade openness and income are cointegrated and statistically significant. The Vector error correction model also supports the long run and short run integration.