The short and longer term potential welfare impact of global commodity inflation in Tanzania

This paper uses a computable general equilibrium model to assess the welfare impact of commodity price inflation in Tanzania and possible tax policy responses in the short, medium, and long term. The results suggest that global commodity inflation since 2006 may have had a significantly negative impact on all Tanzanian households. Most of the negative impact comes from the rise in the price of oil. In contrast, food price spikes are potentially welfare improving for all Tanzanian households in the medium to long run. In comparison with nonpoor households, poor households in Tanzania may be relatively shielded from global commodity inflation because they derive a larger share of their incomes from agricultural activity and consume less oil-intensive products. Finally, the results suggest that tax policies encouraging greater agricultural production and consumption may help to reduce poverty. In contrast, policies discouraging agricultural production (such as export bans) bear the risk of increasing poverty in the long run. However, such policies would only effect at the margin (in one direction or the other) the likely impact of global commodity inflation on poverty.Markets and Market Access,Economic Theory&Research,Emerging Markets,Currencies and Exchange Rates,Rural Poverty Reduction

Human capital and growth : the recovered role of education systems

Recent empirical studies question conventional wisdom about the importance of education to growth. These results partly reflect how international differences in the quality of education systems--defined by the systems'ability to produce one marginal unit of productive human capital--are not taken into account. The author estimates neoclassical growth models on panel data in which the elasticity of human capital depends stochastically on different characteristics of the education system. Among characteristics that explain differences in quality are education infrastructure, the initial endowment of human capital, and the ability to distribute educational services equally among potential students. Giving priority to primary education for all rather than secondary educationto a few is more likely to foster growth (for the same fiscal burden). But parallel actions are also probably needed--for example, promoting institutions that motivate skilled workers to spend time on growth-promoting activities and encouraging the inflow of foreign technologies to maximize the social return to public investment in education.Economic Theory&Research,Labor Policies,Capital Markets and Capital Flows,Decentralization,Social Capital,Economic Theory&Research,Achieving Shared Growth,Inequality,Economic Growth,Social Capital

Migration and Education Decisions in a Dynamic General Equilibrium Framework

With growing international skilled labor mobility, education and migration decisions have become increasingly inter-related, and potentially have a large impact on the growth trajectories of source countries, through their effects on labor supply, savings, or the cost of education. The authors develop a generic dynamic general equilibrium model to analyze the education-migration nexus in a consistent framework. They use the model as a laboratory to test empirical conditions for the existence of net brain gain, that is, greater domestic accumulation of human capital (in per capita terms) with greater migration of skilled workers. The results suggest that although some structural parameters can favor simultaneously greater human capital accumulation and greater skilled migration --such as high ratio of remittances over domestic incomes, high dependency ratios in migrant households, low dependency ratios in source countries, increasing returns to scale in the education sector, technological transfers and export market access with Diasporas, and efficient financial markets -- this does not necessarily mean that greater migration encourages the constitution of greater stocks of human capital in source countries.Migration; Education; Brain Gain; Brain Drain; General Equilibrium Models

Exploring Lebanon's growth prospects

This paper attempts to identify Lebanon's greatest constraints to economic growth, following a growth diagnosis approach. It concludes that fiscal imbalances and barriers to entry are most binding on long-term growth. Macroeconomic imbalances and related perceived risks affect the nature of investment decisions in Lebanon, in favor of liquid instruments rather than longer-term productive investments. Further, many barriers to entry discourage agents from investing in a number of markets: legal impediments to competition, corruption, and a set of fiscal incentives favoring the allocation of resources to non-tradable sectors, where potential demand and investment opportunities are scarcer. In turn, using a steady-state computable general equilibrium model, the paper assesses the long-term growth impact of a selected set of policy reforms envisaged to lift such constraints. Results suggest that 1 to 2 percentage points of additional GDP growth per year could be gained through public expenditure reform, greater domestic competition, and tax harmonization.Economic Theory&Research,Debt Markets,,Emerging Markets,Access to Finance

The impact of food inflation on urban poverty and its monetary cost : some back-of-the-envelope calculations

This paper uses a sample of 73 developing countries to estimate the change in the cost of alleviating urban poverty brought about by the recent increase in food prices. This cost is approximated by the change in the poverty deficit, that is, the variation in financial resources required to eliminate poverty under perfect targeting. The results show that, for most countries, the cost represents less than 0.1 percent of gross domestic product. However, in the most severely affected, it may exceed 3 percent. In all countries, the change in the poverty deficit is mostly due to the negative real income effect of those households that were poor before the price shock, while the cost attributable to new households falling into poverty is negligible. Thus, in countries where transfer mechanisms with effective targeting already exist, the most cost-effective strategy would be to scale up such programs rather than designing tools to identify the new poor.Rural Poverty Reduction,Population Policies,Food&Beverage Industry,Debt Markets

Double Dividend with Trade Distortions: Analytical Results and Evidence from Chile

The double-dividend debate evolves around the possibility (or not) of substituting environmental taxes for more distortionary taxes to reduce both pollution degradation or damages (the first dividend) and the excess burden of existing taxes (the second dividend). This debate tends to center on labor market distortions, but this paper shifts the focus to trade and environmental distortions. Specifically, Beghin and Dessus empirically explore the trade/environment double-dividend with an applied general equilibrium model of the Chilean economy. Findings suggest that swapping environmental taxes for trade distortions in Chile does indeed improve welfare. Furthermore, the swap would pay for itself under the assumption of separable pollution damages from market-good consumption

Empirical Modelling of Trade and the Environment

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Growth, Trade, and the Environment Nexus in Chile: A Comprehensive Assessment

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Trade Integration, Environmental Degradation, and Public Health in Chile: Assessing the Linkages

This paper uses an empirical simulation model to examine links between trade integration, pollution, and public health in Chile. Using a general equilibrium framework, we synthesize economic, engineering, and health data in a way that elucidates this complex relationship and can support more coherent policy in all three areas. The basic tool of analysis is a 72-sector calibrated general equilibrium (CGE) model, incorporating monitoring functions for 13 effluent categories and a variety of mortality and morbidity indicators. While the methodology supports more general applications, present attention is confined to atmospheric pollution and health status in the Santiago metropolitan area

Trade integration, environmental degradation, and public health in Chile: assessing the linkages

We use an empirical simulation model to examine links between trade integration, pollution, and public health in Chile. We synthesize economic, engineering, and health data to elucidate this complex relationship and support more coherent policy. Trade integration scenarios examined include Chile\u27s accession to the NAFTA, MERCOSUR, and unilateral opening to world markets. The latter scenario induces substantial worsening of pollution, partly because it facilitates access to cheaper and dirty energy, and has a significant negative effect on urban morbidity and mortality. Damages caused by rising morbidity and mortality are of similar magnitude and substantial. Emissions of small particulates, SO2, and NO2, have the strongest impact on local mortality and morbidity. These three pollutants appear to be complementary in economic activity. Unilateral trade integration combined with a tax on small particulates brings welfare gains, which are 16 per cent higher than those obtained under unilateral trade reform alone