Trade liberalization and poverty reduction in Africa: computable general equilibrium models approach. Literature review

Abstract

The link between trade liberalization and poverty reduction has played a crucial role on economic policy in developing and least developed countries, particularly in sub-Saharan Africa. Academic research shows a remarkable lack of consensus and no clear effects in the direction of these linkages. This study presents an overview of the impact of trade liberalization on poverty in Sub-Saharan Africa within a general equilibrium framework. In order to do that, the links between trade liberalization and poverty are firstly summarized, reviewing the existent literature. After briefly describing the basic and extended structure of computable general equilibrium models, the advantages and drawbacks of using this methodology to analyze the relation between these two variables is shown, including the main findings from previous literature applied to the particular case of Sub-Saharan countries. Most of the studies conclude that, while trade liberalization has positive effects on poverty reduction in the long run, it should be accompanied by structural reforms, industrial and redistribution policies in order to minimize the expected negative effects in the short-term