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Does Trade Liberalisation Lead to Poverty Alleviation? a CGE Microsimulation Approach for Zimbabwe

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Author Info
Margaret Chitiga
Ramos Mabugu

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Abstract

A CGE microsimulation model is used to study the poverty impacts of trade liberalization in Zimbabwe. A sample of 14006 households from a 1995 household survey is individually modeled in a CGE framework. The experiment performed is a 50 percent reduction in all import tariffs. The sectors with the highest initial tariffs are the non-export agriculture sectors and the most export-intensive sectors are found in agriculture and in mining. The halving of tariffs favors export-oriented sectors, mainly in agriculture, whereas industrial sectors are hardest hit by the increased import competition. As agriculture is intensive in unskilled labor and industry is intensive in skilled labor, unskilled wages rise relative to skilled wages. The consumer prices fall and this, together with increased unskilled wages, leads to a fall in poverty. The fall in the price of manufactured food, which is consumed mainly in urban areas, coupled with the large number of unskilled workers in these urban areas, explains why poverty falls more here than in rural Zimbabwe.

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Publisher Info
Paper provided by PEP-MPIA in its series Cahiers de recherche MPIA with number 2006-18.

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Date of creation: 2006
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Handle: RePEc:lvl:mpiacr:2006-18

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Related research
Keywords: Computable General Equilibrium; Trade Liberalisation; Microsimulation; Poverty;

Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty

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This page was last updated on 2009-12-2.

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