How Does Vietnam's Accession to the World Trade Organization Change the Spatial Incidence of Poverty?

Trade policies can promote aggregate e?ciency, but the ensuing structural adjustments generally create both winners and losers. From an incomes perspective, trade liberalization can raise GDP per capita, but rates of emergence from poverty depend upon individual household characteristics of economic participation and asset holding. To fully realize the growth potential of trade, while limiting the risk of rising inequality, policies need to better account for microeconomic heterogeneity. One approach to this is the geographic targeting, which shifts resources to poor areas. This study combines an integrated microsimulation-CGE model with the small area estimation to evaluate the spatial incidence of Vietnam's accession to the WTO. Provincial-level poverty reduction after full liberalization was heterogeneous, ranging from 2.2 per cent to 14.3 per cent. Full liberalization will bene?t the poor on a national basis, but the northwestern area of Vietnam is likely to lag behind. Furthermore, poverty can be shown to increase under comparable scenarios.trade liberalization, microsimulation, computable general equilibrium, small-area estimation, Vietnam

Globalization, Economic Reform, and Structural Price Transmission: SAM Decomposition Techniques with an empirical application to Vietnam

Globalization poses special challenges for economies in transition, particularly those which have been slow to reform systems of administered prices. Such allocation mechanisms now encounter significant friction from external market forces, and it is vital for policymakers to better anticipate the incidence of external price transmission. In this paper, we propose a novel variation of multiplier decomposition methods; make use of an up-to-date social accounting matrix (SAM) for Vietnam; and demonstrate how this kind of information can help identify adverse incentive and wealth effects that might undermine reform and structural adjustments efforts in this important emerging Asian economy.Price transmission, SAMs, multiplier decomposition, Vietnam

How does Vietnam's accession to the World Trade Organization change the spatial incidence of poverty?

Trade policies can promote aggregate efficiency, but the ensuing structural adjustments generally create both winners and losers. From an incomes perspective, trade liberalization can raise gross domestic product per capita, but rates of emergence from poverty depend on individual household characteristics of economic participation and asset holding. To fully realize the growth potential of trade, while limiting the risk of rising inequality, policies need to better account for microeconomic heterogeneity. One approach to this is geographic targeting that shifts resources to poor areas. This study combines an integrated microsimulation-computable general equilibrium model with small area estimation to evaluate the spatial incidence of Vietnam's accession to the World Trade Organization. Provincial-level poverty reduction after full liberalization was heterogeneous, ranging from 2.2 percent to14.3 percent. Full liberalization will benefit the poor on a national basis, but the northwestern area of Vietnam is likely to lag behind. Furthermore, poverty can be shown to increase under comparable scenarios.Rural Poverty Reduction,Population Policies,Economic Theory&Research,Achieving Shared Growth

Household Income Determination in Vietnam: A Structural Analysis with Implications for Market Reform

Over two-thirds of Vietnam’s population reside in the rural sector, and recent economic reform initiatives may not realize their full potential to benefit the rural sector if rural links to the rest of the economy are too weak. In this paper, we demonstrate how multiplier decomposition methods can elucidate the complexities of income determination, and in particular the prominent role played by indirect linkages that depend upon market interation. Techniques like this can help identify opportunities for policy makers to facilitate economic integration and more widely propagate the benefits of economic reform and growth.Household Income Determination in Vietnam

An evaluation of neutral trade policy incentives under increasing returns to scale

This paper sets out to test the robustness of Balassa's recommendation of neutral incentives to domestic and export sales in a setting where some sectors have domestic market power. This paper shows analytically that the welfare effects of trade policy are more complex than they are in a setting of across-the-board constant returns to scale. In particular, it shows, analytically and numerically, that the standard distortionary costs of protection emphasized under conditions of constant returns to scale must be amended to accommodate, among other things, the welfare effects of changes in scale efficiency. Illustrative numerical calculations also show that the magnitude of the welfare gains or losses from trade policy intervention are sensitive to the determinants of firm entry and exit. Calculations comparing trade policies that achieve neutrality of incentives between sales to domestic and those to foreign markets found such policies to be generally superior to policies creating non-neutral incentives. Numerical results also suggest that export promotion is likely to be more beneficial than protection for sectors with increasing returns to scale. Finally, illustrative calculations of optimal trade policy packages suggest that the benefits of departing from the principle of neutrality, or nondiscrimination between domestic and export sales, may be insufficient to justify their higher administrative costs.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Markets and Market Access,Access to Markets

Industrial organization and trade liberalization : evidence from Korea

Drawing on evidence about industrial organization and market structure, the authors develop a computable general equilibrium model in selected industrial sectors with increasing returns to scale. They use this model to estimate the welfare gains Korea would realize from abolishing the import restraints prevailing in 1982. Under constant returns to scale, they estimate welfare gains to be 1 percent of GDP. With increasing returns to scale in three industrial sectors, they estimate welfare gains ranging from -0.5 percent to 10 percent of 1982 GDP, depending on assumptions about the pricing behavior (markup pricing or Cournot competition) and profit levels that existed under protection.Economic Theory&Research,Environmental Economics&Policies,Markets and Market Access,Access to Markets,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

International capital mobility and the costs of U.S. import restraints

In a series of recent papers, Neary and others have established the importance of trade in factor services, especially capital, in determining the welfare effects of import restrictions by tariffs, QRs, and VERs. In the absence of induced terms-of-trade changes and rental rate effects, Neary demonstrates that international capital mobility raises the costs of tariff protection and lowers that of QRs and VERs. This paper examines the impact of international capital mobility on the welfare effects of import protection by tariff, QRs, and VERs. Generalizing the work of Neary and others to take explicit account of induced terms-of-trade and rental rate effects, this paper demonstrates that the qualitative influence of capital mobility on the costs of protection cannot be ascertained unambiguously. The aggregate welfare effects of import restraints for the U.S. are simulated under different assumptions about international capital mobility, and the influence of the size of the U.S. in world markets. The paper sets up an analytical model that indicates the general links between international capital mobility and the welfare effects of different forms of import restraint. It reports onthe estimated welfare impact of international capital mobility on the welfare effects of U.S. import protection.Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Banks&Banking Reform,Trade Policy

Global Economic Prospects for Increasing Developing Country Migration into Developed Countries

Global labor markets have evolved dramatically in the last several decades and will continue to so for some time to come, driven by changing population demographics, economic globalization, dramatic changes in transportation technology, and accelerating institutional change. All these characteristics of migration make it an essential policy issue for the human development agenda. The United Nations Human Development Report for 2009 intends to provide a forward-looking assessment of global labor market dynamics, with particular reference to the effects of increased labor mobility on global patterns of employment and output. To date, the most rigorous analysis of this subject is the World Bank Global Prospect Group’s forecasts with their Global Economic Prospects Linkage model. This report describes how an update of the GEP model captures more detailed information on global labor movements and heterogeneity, and reports new projections on global migration patterns. These results suggest complex market interactions between migrants and resident workers, whether native or migrant, and between labor and other factors of production. For example reducing migration raises the premium on migrant labor in the destination countries, while lowering the relative return to capital. The first effect makes for higher real income, consumption, and remittances for migrants of both types. For native populations in high income countries, the negative capital income effect dominates the wage effect of reduced competition from migrants. It is perhaps ironic that reducing labor competition is more beneficial to migrants, who lack the capital income and thereby gain absolutely from rising relative wages. Of course one of the primary demand drivers for migrants is the desire to profit from using capital resources more fully within high income economies. In OECD economies, pension schemes guarantee that a significant part of these profits accrue indirectly to native workers. Taken together, these results strongly support the argument that migration has beneficial growth effects on global real economic activity, improving the efficiency of international resource allocation for the benefit of both sending and receiving countries. However, these reassuring aggregate results mask more complex interactions in domestic labor markets, and there will inevitably be both winners and losers from the ensuing structural adjustments. Having said this, the existence of substantial aggregate gains, particularly new fiscal resources for the public sector, suggests the prospect of adjustment assistance to offset adverse impacts.Migration, globalization, North-South

Economic Structure and Development in an Emergent Asian Economy: Evidence from a Social Accounting Matrix for Vietnam

Vietnam started a process of economic reform in 1986 and is presently opening up its economy to regional and global economic forces. As a result, Vietnam faces significant challenges in the area of economic policy analysis. This paper reviews insights emerging from a detailed social accounting matrix (SAM), compiled for the year 2000. The SAM reflects Vietnam’s heavy reliance on primary sector activities, but we also find that agricultural potential could be expanded significantly. In other sectors, the critical importance of sustained commitments to human capital development is apparent. In this context, the international donor community can support the ongoing transformation process through concerted training and capacity building initiatives that have proven successful elsewhere in the region.Economic structure,Economic reform, Vietnam