ABSTRACT
Examination of the relationships between trade, trade policy and poverty shows that trade can have significant effects on total income and its distribution, and therefore on poverty. In traditional terms, opening to trade should raise a country’s income by permitting it to change the composition of its output to a more efficient structure that is, permitting it to specialize according to its comparative advantage. Trade theory argues that increasing the openness of an economy improves the return to factors which are less scarce in the country than in those to which it opens up. The main message is that the impact of trade, foreign direct investment (FDI) and migration depends on the complementary conditions in place, many of which can be influenced by appropriate policies. The links between FDI and income inequality are complex. When discussing the econometric evidence of FDI on growth and productivity, there are different types of econometric studies.
