What complementary policies may contribute to the inclusiveness of international openness? (TIID Working Paper Series 2/13)

Working paper1 Nov 2013

This paper studies the linkages between international openness and inclusive growth, understood as better access to productive employment and entrepreneurship, the reduction of poverty and a more equal income distribution. It introduces the notion of inclusive trade as the linkages through which international integration can contribute to inclusive growth. Four dimensions of potential linkages are analyzed, namely: (i) aggregate employment and its distribution, (ii) aggregate productivity, (iii) poverty and income inequality, and (iv) equal opportunities. A literature review covering each of these four dimensions lays the foundation for own empirical work. Using aggregate data from the Asia-Pacific region for 1988 to 2010, the analysis provides evidence for a range of complementary policies that may enhance the inclusiveness of growth in the presence of international openness. Among the suggested policies are increasing labor market flexibility, aggregate investment and information and communication technology expenditure, as well as providing equal access to education.