Abstract
The paper attempted to see the relationship between trade liberalization and poverty and inequality in India. For trade liberalization, volume of trade as ratio of GDP, head count ratio for poverty and Gini-coefficient has been used for income inequality. The granger causality technique is applied to time series data for the years 1970-2009. The results indicate that trade has no significant effect on poverty and poverty has no effect on trade. However, trade has increased inequality in the short-run and inequality affected the trade in the long-run negatively. It partially contradicts the prediction of the Stolper- Samuelson theorem.
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