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Poverty Implications of Agricultural and Non-agricultural Price Distortions in Pakistan

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  • Cororaton, Caesar B.
  • Orden, David

Abstract

Using recent estimates of industry assistance rates, the effects of trade liberalization in the rest of the world and in Pakistan alone are analyzed using a global and a Pakistan CGE model under two tax replacement schemes: a direct income tax and an indirect tax replacement. The results indicate that the distributional and poverty effects in Pakistan of a unilateral liberalization of all traded goods are significantly greater than the effects of trade liberalization in the rest of the world. There is relatively higher increase in real income and larger decline in poverty incidence in poor households both in rural and urban areas. The effects of agricultural trade liberalization alone in both the rest of the world and in Pakistan are considerably smaller than those from trade liberalization involving all goods. In both the agricultural and all-goods trade liberalization scenarios involving direct income tax replacement, real household income is raised and the poverty incidence is lowered at varied rates across all household groups except for the urban non-poor. When an indirect tax replacement is used, where the burden of replacing tariff revenue is shared by all household groups depending on their consumption structure, there is reduction in household income for most of the groups and less reduction of poverty.

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Bibliographic Info

Paper provided by World Bank in its series Agricultural Distortions Working Paper with number 52789.

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Date of creation: Jun 2009
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Handle: RePEc:ags:wbadwp:52789

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Web page: http://www.worldbank.org
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Related research

Keywords: Distorted incentives; agricultural and trade policy reforms; national agricultural development; Agricultural and Food Policy; International Relations/Trade; F13; F14; Q17; Q18;

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  1. Paul Dorosh & Muhammad Khan Niazi & Hina Nazli, 2006. "A Social Accounting Matrix for Pakistan, 2001-02: Methodology and Results," PIDE-Working Papers 2006:9, Pakistan Institute of Development Economics.
  2. Valenzuela, Ernesto & Kym Anderson, 2009. "Alternative Agricultural Price Distortions for CGE Analysis of Developing Countries, 2004 and 1980-84," GTAP Research Memoranda 2925, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  3. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper 48394, World Bank.
  4. Cororaton, Caesar B. & Orden, David, 2008. "Pakistan's cotton and textile economy: Intersectoral linkages and effects on rural and urban poverty," Research reports 158, International Food Policy Research Institute (IFPRI).
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