Trade liberalization, Growth and Inequality in Bangladesh: An Empirical Analysis

This paper examines time series evidence to establish a link between trade, economic growth and income inequality in Bangladesh. The empirical results from a Vector Autoregression (VAR) model suggest that there is some evidence of trade liberalization accelerating growth in Bangladesh. Trade openness promotes investment. We find little evidence of trade affecting income distribution or of income distribution affecting growth or investment. Given poor quality of the data on inequality measures, there is scope for further investigation. Sensitivity analysis with change in the sample time period suggests that during the post independence period investment has significant positive impact on trade liberalization.