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Income effects of alternative trade policy adjustments on Philippine rural households: a general equilibrium analysis

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  • Bautista, Romeo M.
  • Thomas, Marcelle

Abstract

Three types of trade policy adjustments to deal with an unsustainable current account deficit are examined in this paper for their economywide income and equity effects, based on the results of simulation experiments using a CGE model of the Philippine economy. Gross domestic product (GDP) expectably decreases with import rationing and less markedly, with the imposition of a general import surtax; by contrast, adjustment through the reduction of tariffs leads to a larger GDP. The latter result, however, is counterbalanced by a substantial loss in government income. With respect to the distribution of income gains (and losses), the additional market distortions and rent-seeking that accompany the implementation of import rationing heavily discriminate in favor of Metro Manila households, whose average income is the highest among the five household groups distinguished in the model. Moving to a general import surtax represents an improvement in that non-Metro Manila households are penalized less. However, these first two policy options are deemed inferior to tariff liberalization which yields larger income benefits to small-farm and "other rural" households relative to the more affluent Metro Manila, other urban, and large-farm households.

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Bibliographic Info

Paper provided by International Food Policy Research Institute (IFPRI) in its series TMD discussion papers with number 22.

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Date of creation: 1997
Date of revision:
Handle: RePEc:fpr:tmddps:22

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Keywords: Import quotas.; Income distribution; Tariff.; Trade liberalization.; Philippines.;

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Cited by:
  1. Bittencourt, Mauricio V.L. & Kraybill, David S. & Larson, Donald W., 2006. "Consequences Of Trade Liberalization On Poverty And Income Distribution In Brazil," 2006 Annual meeting, July 23-26, Long Beach, CA 21128, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Elena Ianchovichina & Alessandro Nicita & Isidro Soloaga, 2002. "Trade Reform and Poverty: The Case of Mexico," The World Economy, Wiley Blackwell, vol. 25(7), pages 945-972, 07.
  3. Reimer, Jeffrey J., 2002. "Estimating the Poverty Impacts of Trade Liberalization," GTAP Working Papers 1163, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  4. Thomas Hertel & Jeffrey Reimer, 2005. "Predicting the poverty impacts of trade reform," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 377-405.
  5. Mbabazi, Jennifer, 2002. "A CGE Analysis of the Short-run Welfare Effects of Tariff Liberalisation in Uganda," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  6. Rodriguez, U-Primo E., 2007. "State-of-the-Art in Regional Computable General Equilibrium Modelling with a Case Study of the Philippines," Agricultural Economics Research Review, Agricultural Economics Research Association (India), vol. 20(1).

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