Trade Policy and Poverty in Benin: a General Equilibrium Analysis

Economic and financial crisis in Benin since 1980s led the government to embark on a process of economic reforms in 1991. These reforms sought to remedy the fiscal and trade imbalances in order to accelerate economic growth. Trade policy reform was given priority. Import bans and quotas were eliminated, import duties abolished and a compensatory tax on commodities sold in the domestic market instituted. This study analyzes the effects of the trade policy reforms using a computable general equilibrium (CGE) model and household survey data. Results show that these reforms are more beneficial to households in urban areas, but contribute to worsening poverty conditions of the most poor in rural areas. If liberalization policies target better strategies aimed at fighting poverty, or at least not deteriorating the situation, they need to be designed in a way that they do not worsen the poverty conditions of the most destitute in society.CGE, trade, poverty, Benin

Regionalization and Labour Market Rigidities in Developing Countries: A CGE Analysis of UEMOA

In this study, we analyse the impact of the creation of a customs union among UEMOA (Western African Economic and Monetary Union)countries, with a special emphasis on the labour market structure. The implementation of the customs union reform will translate in most of these countries, into a greater openness, even with third party countries. This greater openness raises concerns in these countries as regards its potential impact on welfare, production and employment. In this study, in contrast to many other papers, we relax the assumption of a perfect functioning of the labour market. We consider the presence of a dualism in the labour market and the existence of a minimum wage for the formal workers. We use a multi-country and multi-sectoral computable general equilibrium model (CGE) to assess the impact of the reform. We find that the presence of a minimum nominal wage for the formal workers may significantly reduce the gains stemming from the customs union reform. Our simulation results indicate that the costs induced by this rigidity may exceed 45%, in some cases, in terms of the reduction in the welfare gains obtained without rigidity.Economic integration, Customs union, Labor market, Dualism, Wage rigidity

Agricultural Trade Liberalization, Productivity Gain and Poverty Alleviation: a General Equilibrium Analysis

Computable General Equilibrium (CGE) models have gained continuously in popularity as an empirical tool for assessing the impact of trade liberalization on agricultural growth, poverty and income distribution. Conventional models ignore however the channels linking technical change in agriculture, trade openness and poverty. This study seeks to incorporate econometric evidence of these linkages into a CGE model to estimate the impact of alternative trade liberalization scenarios on poverty and equity. The analysis uses the Latent Class Stochastic Frontier Model (LCSFM) and the metafrontier function to investigate the influence of trade openness on agricultural technological change. The estimated productivity effects induced from higher levels of trade are combined with a general equilibrium analysis of trade liberalization to evaluate the income and prices changes. These effects are then used to infer the impact on poverty and inequality following the top-down approach. The model is applied to Tunisian data using the social accounting matrix of 2001 and the 2000 household expenditures surveys. Poverty is found to decline under agricultural and full trade liberalization and this decline is much more pronounced when the productivity effects are included.Openness, Agriculture, Productivity, Poverty, CGE modeling

L’économie du Nunavik entre 1983 et 2003

Cet article compile des données sur l’économie formelle de la région du Nunavik, au nord du Québec, portant sur une période de vingt ans. Il permet de vérifier que les caractéristiques de l’économie régionale se maintiennent, voire s’intensifient, durant toute la période : structure industrielle dominée par l’administration publique, rôle majeur du salariat, importation massive de produits finis et de biens intermédiaires, importance variable du secteur minier… Cet examen permet surtout d’identifier certaines tendances méconnues. Les politiques visant à réduire les déficits et la dette publique ont eu des effets plus profonds au Nunavik que dans l’ensemble du Québec; il montre une rémunération asymétrique en vertu de laquelle les autochtones accaparent une proportion du revenu toujours plus faible que leur proportion dans la main-d’oeuvre; les paliers gouvernementaux régionaux et locaux ont une importance croissante dans la prestation des services, qui ne se reflète pas forcément dans le pouvoir politique qu’ils exercent. Il conclut que, si l’autonomie décisionnelle peut être accrue par le projet d’une nouvelle forme de gouvernement régional, les grandes forces contemporaines – politiques néo-libérales et marchés mondiaux – continuent d’influencer l’économie régionale, intimement liée à celle du reste du Québec et du monde.This article compiles data on the formal economy of the region of Nunavik, in the North of Quebec, covering a period of twenty years. It allows to verify whether the regional economy maintains, or intensifies, its course for the period studied with regard to the following characteristics : industrial structure dominated by public administration ; major role of the wage-earning class ; massive imports of finished products and intermediate goods ; and the variable importance of the mining sector. The study also identifies certain less well-known trends, namely : policies aiming to reduce the deficits and public debt have had a greater impact on Nunavik than on Quebec as a whole; asymmetric remuneration, meaning that the incomes of Aboriginals are always lower than their proportion in the workforce ; and regional and local governments that play an increasing role in the provision of services, yet which is not necessarily reflected in the political power they exercise. The authors conclude that, even though decision-making autonomy can be increased by a new form of regional government, the main current driving forces, i.e., neo-liberal politics and global markets, will nevertheless continue to influence the regional economy, which is intimately linked to that of the rest of Quebec and the world

Case Study: The growth and poverty impacts of trade liberalization in Senegal

Most empirical studies find relatively small welfare and poverty impacts of trade liberalization, mainly as a result of the static framework generally used, in which welfare gains and poverty impacts result solely from a short term reallocation of resources. Using Senegal as a case study, we illustrate the results of integrating the growth and productivity gain effects of trade liberalization with the resulting long-run impacts on welfare and poverty. We show that the distributional impacts between poor and non-poor depend upon the specific nature of the trade liberalization policies adopted; and the characteristics of the economy in which it occurs. In the Senegalese case, the predicted principal beneficiaries of trade liberalization are urban and higher skill workers.trade liberalization; CGE; productivity gains; growth income curve

The Gender and Poverty Impacts of Trade Liberalization in Senegal

Developing countries are deeply engaged in trade negotiations at the bilateral, regional and international (WTO) levels. As imports, exports and tariff duties all occupy an important part of their economies, far-reaching impacts on production, labor and capital markets, household incomes and, perhaps most importantly, economic growth will indubitably ensue. As men and women occupy very different roles in these economies, particularly in terms of the import and export orientation of the sectors in which they work, they will be affected very differently by these reforms. To anticipate these changes, a dynamic economy-wide model is developed with an application to Senegal. Whereas most similar existing studies consider the comparative static resource reallocation effects of trade reforms, ours is the first to focus on the growth effects (“dynamic gains from trade”), which are thought to be possibly much larger. The trade-productivity link is revealed to be the strongest growth channel, raising GDP by over three percentage points by the end of our 15 year simulation period. Trade liberalization is found to increase the gender wage gap in favor of men, especially among unskilled workers, as men are more active in export-oriented sectors such as cash crops and mining whereas women contribute more to import-competing sectors such as food crops. Furthermore, the ensuing growth effects further widen the over-all gender wage gap, as the productivity gains from increased openness are greatest in female-intensive sectors in which imports rise markedly. Thus, this suggests the need to implement policies aimed at increasing both unskilled and skilled women’s exposure in labor-intensive export industries, which is currently male dominated. A linked microsimulation analysis, based on a survey of Senegalese households, show that trade liberalization reduces poverty in Senegal, particularly in rural areas. While the fall in the relative wages of rural workers would initially lead us to believe that rural households would lose the most from trade liberalization, they are in fact compensated by greater consumer price savings, given that they consume more goods from the initially protected agricultural and agro-industrial sectors.Senegal, Trade, Gender, Poverty, Growth

The Impact of the International Economic Crisis in South Africa

A dynamic computable general equilibrium model based on the PEP standard model developed by Decaluwé et al. (2009) is used to evaluate the impacts of the international crisis on the South African economy. However, we have changed some assumptions in order to better represent South African specificities. A major innovation in this regard is the modelling of unemployment and the influence of labour unions on the labour market. Two scenarios encompassing a severe and moderate recession are run. The effects of the crisis on the economy are really quite harsh, even in the moderate recession scenario, both in the short run and the long run. Indeed, the decrease of world prices combined with the drop of world demand lead to a decrease in production for many sectors with consequent laying off of workers. The impact on institutions is also worrying: agents see their income as well as their savings decreasing. The huge drop in firms’ savings has a dire impact on total investment while the huge negative impact on government accounts of protracted slow global growth imply tight public budgets for some time to come. Thus, some gains made by the government prior to the crisis may have been reversed by the economic crisis. It is apparent from the results that the impact of the crisis will drag into the long run with the situation still below what it would have been in the absence of a crisis until 2015.Dynamic Computable General Equilibrium, Economic Crisis, South Africa

Fiscal Space and Public Spending on Children in Burkina Faso

International audienceDespite experiencing high growth rates in recent decades, Burkina Faso remains a poor country. Poverty among children is particularly worrying, as it has long term (and often irreversible) effects on individuals. Furthermore, it can be transmitted from one generation to the next and significantly reduce economic growth. To address this issue requires fiscal and budgetary policies supporting health, education and improving the household economy. At the same time

The Gender and Poverty Impacts of Trade Liberalization in Senegal

Developing countries are deeply engaged in trade negotiations at the bilateral, regional and international (WTO) levels. As imports, exports and tariff duties all occupy an important part of their economies, far-reaching impacts on production, labor and capital markets, household incomes and, perhaps most importantly, economic growth will indubitably ensue. As men and women occupy very different roles in these economies, particularly in terms of the import and export orientation of the sectors in which they work, they will be affected very differently by these reforms. To anticipate these changes, a dynamic economy-wide model is developed with an application to Senegal. Whereas most similar existing studies consider the comparative static resource reallocation effects of trade reforms, ours is the first to focus on the growth effects (“dynamic gains from trade”), which are thought to be possibly much larger. The trade-productivity link is revealed to be the strongest growth channel, raising GDP by over three percentage points by the end of our 15 year simulation period. Trade liberalization is found to increase the gender wage gap in favor of men, especially among unskilled workers, as men are more active in export-oriented sectors such as cash crops and mining whereas women contribute more to import-competing sectors such as food crops. Furthermore, the ensuing growth effects further widen the over-all gender wage gap, as the productivity gains from increased openness are greatest in female-intensive sectors in which imports rise markedly. Thus, this suggests the need to implement policies aimed at increasing both unskilled and skilled women’s exposure in labor-intensive export industries, which is currently male dominated. A linked microsimulation analysis, based on a survey of Senegalese households, show that trade liberalization reduces poverty in Senegal, particularly in rural areas. While the fall in the relative wages of rural workers would initially lead us to believe that rural households would lose the most from trade liberalization, they are in fact compensated by greater consumer price savings, given that they consume more goods from the initially protected agricultural and agro-industrial sectors