Much current debate focuses on the role of growth in alleviating poverty. However, the majority of computable general equilibrium (CGE) models used in poverty and inequality analysis are static in nature. The inability of this kind of model to account for growth (accumulation) effects makes them inadequate for long run analysis of the poverty and inequality impacts of economic policies. They exclude accumulation effects and do not allow the study of the transition path of the economy where short run policy impacts are likely to be different from those of the long run. To overcome this limitation we use a sequential dynamic CGE microsimulation model that takes into account accumulation effects and makes it possible to study poverty and inequality through time. Changes in poverty are then decomposed into growth and distribution components in order to examine whether de-protection and factor accumulation are pro-poor or not. The model is applied to Senegalese data using a 1996 social accounting matrix and a 1995 survey of 3278 households. The main findings of this study are that trade liberalisation induces small increases in poverty and inequality in the short run as well as contractions in the initially protected agriculture and industrial sectors. In the long run, it enhances capital accumulation, particularly in the service and industrial sectors, and brings substantial decreases in poverty. However, a decomposition of poverty changes shows that income distribution worsens, with greater gains among urban dwellers and the non-poor.
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Find related papers by JEL classification: D33 - Microeconomics - - Distribution - - - Factor Income Distribution D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation F17 - International Economics - - Trade - - - Trade Forecasting and Simulation I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
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