Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis

computable general equilibrium modelling, international trade, poverty, Nepal.

Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis

Concern is growing regarding the poverty impacts of trade liberalization. The strong general equilibrium effects of trade liberalization can only be properly analysed in a CGE model. However, the aggregate nature of CGE models is not suited to detailed poverty analysis. We bridge this gap by constructing a CGE model that explicitly models all households from a nationally representative household survey. We find complex income and consumption effects that would be missed in standard CGE models. Urban poverty falls and rural poverty increases as initial tariffs were highest for agriculture. Impacts increase with income level, resulting in rising income inequality.computable general equilibrium modelling, international trade, poverty, Nepal

A Discontinuous Galerkin Method for Ideal Two-Fluid Plasma Equations

A discontinuous Galerkin method for the ideal 5 moment two-fluid plasma system is presented. The method uses a second or third order discontinuous Galerkin spatial discretization and a third order TVD Runge-Kutta time stepping scheme. The method is benchmarked against an analytic solution of a dispersive electron acoustic square pulse as well as the two-fluid electromagnetic shock and existing numerical solutions to the GEM challenge magnetic reconnection problem. The algorithm can be generalized to arbitrary geometries and three dimensions. An approach to maintaining small gauge errors based on error propagation is suggested.Comment: 40 pages, 18 figures

Trade Reform and Poverty in the Philippines: a Computable General Equilibrium Microsimulation Analysis

The paper employs an integrated CGE-microsimulation approach to analyze the poverty effects of tariff reduction. The results indicate that the tariff cuts implemented between 1994 and 2000 were generally poverty-reducing, primarily through the substantial reduction in consumer prices they engendered. However, the reduction is much greater in the National Capital Region (NCR), where poverty incidence is already lowest, than in other areas, especially rural, where poverty incidence is highest. Tariff cuts lower the cost of local production and bring about real exchange rate depreciation. Since the non-food manufacturing sector dominates exports in terms of export share and export intensity, the general equilibrium effects of tariff reduction is an expansion of this sector and a contraction in the agricultural sector. This, in turn, leads to an increase in the relative returns to factors, such as capital, used intensively in the non-food manufacturing sector and a fall in returns to unskilled labor. As rural households depend more on unskilled labor income, income inequality worsens as a result.Dynamic CGE model, trade liberalisation, poverty, inequality, Senegal

Trade Liberalization and Poverty in Nepal: an Applied General Equilibrium Analysis

Nepal aggressively liberalized its foreign trade during the 1990s. This paper attempts to estimate the impact of trade liberalization on household welfare and poverty in Nepal through the construction of a regional CGE model. The model disaggregates factors of production - capital, land, and labor - by region (urban, Terai and hills/mountains) in order to establish direct links between sector of activity, factor remuneration, and household income. In particular, certain activities are more intensive in factors from a given region (e.g. the manufacturing sector is more intensive in urban factors of production and the agriculture sector is more intensive in Terai factor of production). Regional factor remuneration in turn maps into regional household income. We find that trade liberalization reduces the nominal returns to urban factors of production in comparison with rural factors of production, resulting in a reduction in the relative income of urban households. Rural and urban households consume roughly the same share of industrial goods, but rural households consume relatively more agricultural goods and fewer services. As the fall in consumer prices in the latter two sectors are similar, there is little rural-urban difference in the variation in consumer price indices. Consumer prices generally fall in roughly the same proportion as nominal incomes such that there are negligible welfare changes. However, poverty falls substantially, with the greatest impact in rural Terai, followed by the rural hills and the mountain region, and least in urban areas.Computable general equilibrium modeling, international trade, poverty, Nepal

Guest Editorial - Macro-micro analytics: background, motivation, advantages and remaining challenges

Guest editorial special issue on CGE and microsimulation

Functional Forms and Parametrization of CGE Models

This study focused on the choice of functional forms and their parametrization (estimation of free parameters and calibration of other parameters) in the context of CGE models. Various types of elasticities are defined, followed by a presentation of the functional forms most commonly used in these models and various econometric methods for estimating their free parameters. Following this presentation of the theoretical framework, we review parameter estimates used in the literature. This brief literature review was carried out to be used as a guideline for the choice of parameters for CGE models of developing countries.Trade liberalization, Poverty, Elasticities, Functional forms, Calibration, Computable General Equilibrium (CGE)Model

Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions

Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries, yet global trade in farm products continues to be far more distorted than trade in nonfarm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modeling. This paper summarizes a series of new economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global LINKAGE model results suggest that removing those remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 percent. The analysis based on the Global Trade Analysis Project (GTAP) model for a sample of 15 countries, and ten stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.Poverty, income inequality, price distortions, farm trade policy

Would freeing up world trade reduce poverty and inequality ? the vexed role of agricultural distortions

Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries, yet global trade in farm products continues to be far more distorted than trade in nonfarm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modeling. This paper summarizes a series of new economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global LINKAGE model results suggest that removing those remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 percent. The analysis based on the Global Trade Analysis Project model for a sample of 15 countries, and nine stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.Rural Poverty Reduction,Economic Theory&Research,Emerging Markets,Trade Policy,Achieving Shared Growth

Simulating the Impact of the Global Economic Crisis and Policy. Responses on Children in West and Central Africa

The current global financial and economic crisis, which exacerbates the impacts of the energy and food crises that immediately preceded it, has spread to the developing countries endangering recent gains in terms of economic growth and poverty reduction. The effects of the crisis are likely to vary substantially between countries and between individuals within the same country. Children are among the most vulnerable population, particularly in a period of crisis. Especially in least developed countries, where social safety nets programs are missing or poorly performing and public fiscal space is extremely limited, households with few economic opportunities are at a higher risk of falling into (monetary) poverty, suffering from hunger, removing children from school and into work, and losing access to health services. This study simulates the impacts of the global economic crisis and alternative policy responses on different dimensions of child welfare in Western and Central Africa (WCA) over the period 2009-2011. It is based on country studies for Burkina Faso, Cameroon, and Ghana, which broadly represent the diversity of economic conditions in WCA countries. In order to capture the complex macro-economic effects of the crisis and the various policy responses – on trade, investment, remittances, aid flows, goods and factor markets – and to then trace their consequences in terms of child welfare – monetary poverty, hunger (caloric poverty), school participation, child labour, and access to health services – a combination of macro- and micro-analysis was adopted. The simulations suggest that the strongest effects are registered in terms of monetary poverty and hunger, although large differences between countries emerge. More moderate impacts are predicted in terms of school participation, child labour, and access to health care, although these are still significant and require urgent policy responses. Specifically, Ghana is the country where children are predicted to suffer the most in terms of monetary poverty and hunger, while Burkina Faso is where the largest deteriorations in schooling, child labour and access to health services are simulated. Among the policy responses examined to counteract the negative effects of the crisis on child well-being, a targeted cash transfer to predicted poor children is by far the most effective program. A comparison between a universal and targeted approach is also presented.Global economic crisis, child poverty, hunger, education, child labour, health, West and Central Africa, Burkina Faso, Cameroun, Ghana, social protection