The Impact of Trade Liberalization on Household Welfare in Vietnam
AbstractThis paper evaluates the efficiency and distributional effects of trade liberalization in the context of fiscal reform in Vietnam. The analysis is performed using a computable general equilibrium (CGE) model of the Vietnamese economy calibrated to late- 1990s production and household data. It is a standard small open price taking economy model with CES nested demand and CES production functions. Results show that the efficiency gains (in term of aggregate welfare measure) from the combined tax and tariff reform are modest, but significant redistribution occurs among rich and poor household groups and between urban and rural populations. Careful analyses show that the sharpness of the redistribution falls as the country moves from only trade liberalization the combined tax and tariff reforms. Finally, additional simulations have been performed to make clearer the transmission mechanisms linking tariff policy to income distribution and household welfare. A key finding is that trade liberalization is pro-rich due essentially to the higher share of imported goods consumed by the rich.
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Bibliographic InfoPaper provided by PEP-MPIA in its series Working Papers MPIA with number 2006-02.
Date of creation: 2006
Date of revision:
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CGE model; counterfactual simulations; distributional effects; efficiency; household welfare; tariff; tax reform; trade liberalization; VAT; Vietnam;
Find related papers by JEL classification:
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
- R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General
- C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- D63 - Microeconomics - - Welfare Economics - - - Equity, Justice, Inequality, and Other Normative Criteria and Measurement
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-03-18 (All new papers)
- NEP-CMP-2006-03-18 (Computational Economics)
- NEP-DEV-2006-03-18 (Development)
- NEP-INT-2006-03-18 (International Trade)
- NEP-TRA-2006-03-18 (Transition Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ngee-Choon Chia & Wahba, Sadek & Whalley, John, 1992. "A general equilibrium based social policy model for Cote d'Ivoire," Policy Research Working Paper Series 925, The World Bank.
- Ghosh, Madanmohan & Whalley, John, 2004. "Are price controls necessarily bad? The case of rice in Vietnam," Journal of Development Economics, Elsevier, vol. 73(1), pages 215-232, February.
- Harrison, Glenn W & Rutherford, Thomas F & Tarr, David G, 1993. "Trade Reform in the Partially Liberalized Economy of Turkey," World Bank Economic Review, World Bank Group, vol. 7(2), pages 191-217, May.
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