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Reducing poverty and income inequality in Sri Lanka: does trade liberalisation help?

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  • Sumudu Perera
  • Mahinda Siriwardana
  • Stuart Mounter

Abstract

The impacts of trade liberalisation in South Asia on poverty and income inequality in Sri Lanka are examined in this paper using a multi-country computable general equilibrium model. A non-parametric extended representative household-agent approach employing micro-household survey data is used to estimate the income inequality and poverty effects. Two trade liberalisation policy simulations are investigated: (1) the formation of a South Asian Free Trade Agreement and (2) unilateral trade liberalisation in South Asia. The results indicate that overall income inequality and income inequality among different household groups in the urban, rural and estate sectors in Sri Lanka would fall under both trade liberalisation policies. Foster, Greer and Thorbecke indices reveal that poverty would also decline in all three sectors. In both instances, unilateral trade liberalisation delivers the greatest reductions.

Suggested Citation

  • Sumudu Perera & Mahinda Siriwardana & Stuart Mounter, 2014. "Reducing poverty and income inequality in Sri Lanka: does trade liberalisation help?," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 19(4), pages 629-655, October.
    • Handle: RePEc:taf:rjapxx:v:19:y:2014:i:4:p:629-655
    DOI: 10.1080/13547860.2014.920595
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    1. Tom Van Ourti & Philip Clarke, 2008. "The Bias of the Gini Coefficient due to Grouping," Tinbergen Institute Discussion Papers 08-095/3, Tinbergen Institute.
    2. Hertel, Thomas, 1997. "Global Trade Analysis: Modeling and applications," GTAP Books, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University, number 7685, December.
    3. Jonathan Haughton & Shahidur R. Khandker, 2009. "Handbook on Poverty and Inequality," World Bank Publications - Books, The World Bank Group, number 11985, December.
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    Cited by:

    1. Liyanaarachchi, Tilak S. & Naranpanawa, Athula & Bandara, Jayatilleke S., 2016. "Impact of trade liberalisation on labour market and poverty in Sri Lanka. An integrated macro-micro modelling approach," Economic Modelling, Elsevier, vol. 59(C), pages 102-115.
    2. Manh Toan Nguyen & Tung Lam Dang & Thi Hong Hanh Huynh, 2020. "Trade Liberalization and Income Distribution in Vietnam: Dynamic CGE Approach," Asian Economic Journal, East Asian Economic Association, vol. 34(4), pages 404-429, December.

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