Trade Openness and Regional Inequality: Case of Tunisia

Abstract

Since the 1990s, Tunisia has experienced an increasingly pronounced trade openness and has adopted a multitude of reforms to reinforce it through a large number of agreements with different foreign partners. However, this openness has gone simultaneously with an increase in regional inequalities wish have continued to grow, that is why we are interested in verifying, on one side, how this openness affects economic growth and, on the other one, whether it increases regional disparities within the country over the period (1990-2018). We start from the hypothesis that if trade openness manages to boost economic growth, its positive outcomes can have a contrasting effect at the regional level, benefiting some regions to the detriment of others. By crossing this double effect openness can accentuate territorial imbalances. We will use panel data econometrics to estimate our model. We will test the effect of openness on territorial disparities for the Tunisian case, especially between the 24 governorates where, there is no measure of regional inequalities yet, hence the interest of this study. Our econometric analysis clearly shows that the differences in endowments and characteristics at the level of the regions, such as differences in infrastructure or human capital, positively affect regional inequalities. Openness also appears to be a factor of positive influence, in particular by enhancing the polarization of economic activities and FDI within certain regions to the detriment of others.