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This study challenges the presumed universality of trade liberalization’s growth benefits in Less Developed Countries by analyzing panel data from 37 LDCs (1990–2023) through advanced econometric methods—Augmented Group Mean, Dynamic Ordinary Least Squares, Fully Modified Ordinary Least Squares, and Fixed Effects—to account for cross-country heterogeneity and endogeneity. Results reveal a nuanced duality, GDP growth and export performance positively drive trade openness, while import reliance, income inequality, political instability, labor market inefficiencies, and FDI inflows hinder it. The analysis identifies cross-sectoral interdependence as a critical mechanism, demonstrating how unregulated liberalization exacerbates inequities and institutional fragility in LDCs. The study results emphasize context-specific trade policies to mitigate adverse distributional effects. Policymakers must prioritize institutional reforms, equitable benefit-sharing, and adaptive labor strategies to harness sustainable growth. The study contributes novel insights by integrating macroeconomic, social, and political variables into a cross-country framework, challenging assumptions of linear trade-growth dynamics in LDCs.

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Trade Liberalization and the Elusive Growth Dividend in Less Developed Countries: A Panel Data Analysis with Cross-Sectional Dependence

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  • 发表日期：

    2026年

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  • Safiullah Junejo,
  • Naveed Ahmed Shaikh,
  • Ling Yang

摘要

This study challenges the presumed universality of trade liberalization’s growth benefits in Less Developed Countries by analyzing panel data from 37 LDCs (1990–2023) through advanced econometric methods—Augmented Group Mean, Dynamic Ordinary Least Squares, Fully Modified Ordinary Least Squares, and Fixed Effects—to account for cross-country heterogeneity and endogeneity. Results reveal a nuanced duality, GDP growth and export performance positively drive trade openness, while import reliance, income inequality, political instability, labor market inefficiencies, and FDI inflows hinder it. The analysis identifies cross-sectoral interdependence as a critical mechanism, demonstrating how unregulated liberalization exacerbates inequities and institutional fragility in LDCs. The study results emphasize context-specific trade policies to mitigate adverse distributional effects. Policymakers must prioritize institutional reforms, equitable benefit-sharing, and adaptive labor strategies to harness sustainable growth. The study contributes novel insights by integrating macroeconomic, social, and political variables into a cross-country framework, challenging assumptions of linear trade-growth dynamics in LDCs.