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Poverty Analysis Using an International Cross-Country Demand System

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  • Cranfield, John
  • Preckel, Paul
  • Hertel, Thomas

Abstract

This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from household surveys, and macro-data from the International Comparisons Project. The second innovation relates to a methodology for post-estimation calibration of the global demand system, giving rise to country specific demand systems and an associated expenditure function which, when aggregated across the expenditure distribution, reproduce observed per capita budget shares exactly. The third innovation is use of the calibrated expenditure function to calculate the change in the head-count of poverty, poverty gap and squared poverty gap arising from policy reforms, where the poverty measures are derived using a unique poverty level of utility, rather than an income or expenditure-based measure. We employ these techniques with a demand system for food, other non-durables and services estimated using a combination of 1996 ICP data set and national expenditure distribution data. To illustrate the usefulness of these calibrated models for policy analysis, we assess the impacts of an assumed five percent food price rise as might be following a multilateral trade agreement.

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File URL: http://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=2211
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Bibliographic Info

Paper provided by Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University in its series GTAP Working Papers with number 2211.

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Date of creation: 2006
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Handle: RePEc:gta:workpp:2211

Note: GTAP Working Paper No. 34
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Cited by:
  1. Stone, Susan & Strutt, Anna & Hertel, Thomas, 2010. "Assessing Socioeconomic Impacts of Transport Infrastructure Projects in the Greater Mekong Subregion," ADBI Working Papers 234, Asian Development Bank Institute.
  2. Nicole Hassoun, 2010. "Another Mere Addition Paradox? Some Reflections on Variable Population Poverty Measurement," Working Paper Series wp2010-120, World Institute for Development Economic Research (UNU-WIDER).

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