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Tariff Reduction, Fiscal Adjustment and Poverty in Pakistan: a CGE-Based Analysis

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  • Rizwana Siddiqui
  • Abdul Razzaq Kemal
  • Rehana Siddiqui
  • Ali Kemal

Abstract

After more than four decades of protective trade policy, Pakistan undertook substantial trade liberalization beginning in the 1990s. We assess the short- and long-run impacts of trade liberalization (full and partial) on household incomes, welfare, and poverty under various fiscal scenarios. A computable general equilibrium (CGE) model of the Pakistan economy for the year 1990 is used with 10 household categories (identified by employment status in urban areas and by land holdings in rural areas), 12 production activities, and two factors of production. Our general conclusion is that trade reform improves the average welfare of urban households but reduces the welfare of rural households. In both regions, the rich generally benefit, whereas the poor lose out. The fall in urban poverty dominates the increase in rural poverty such that overall poverty is reduced.

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Bibliographic Info

Paper provided by PEP-MPIA in its series Working Papers MPIA with number 2008-17.

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Date of creation: 2008
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Handle: RePEc:lvl:mpiacr:2008-17

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Keywords: Trade policy; fiscal adjustment; welfare and poverty; CGE;

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References

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  1. Siddiqui, Rizwana & Iqbal, Zafar, 1999. "TARIFF REDUCTION AND FUNCTIONAL INCOME DISTRIBUTION IN PAKISTAN: A CGE Analysis," MPRA Paper 6141, University Library of Munich, Germany.
  2. A. R. Kemal, 1981. "Substitution Elasticities in the Large- Scale Manufacturing Industries of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 20(1), pages 1-36.
  3. Siddiqui, Rizwana & Kemal, A.R., 2002. "Remittances, trade liberalisation, and poverty in Pakistan: The role of excluded variables in poverty change analysis," MPRA Paper 4228, University Library of Munich, Germany, revised Oct 2006.
  4. A.R. Kemal & Rehana Siddiqui & Rizwana Siddiqui, 2001. "Triff Reduction and Income Destribution A CGE-based Analysis for Urban and Rural Households in Pakistan," PIDE-Working Papers 2001:181, Pakistan Institute of Development Economics.
  5. Shoven,John B. & Whalley,John, 1992. "Applying General Equilibrium," Cambridge Books, Cambridge University Press, number 9780521319867, October.
  6. Paul Dorosh & Muhammad Khan Niazi & Hina Nazli, 2006. "A Social Accounting Matrix for Pakistan, 2001-02 : Methodology and Results," Finance Working Papers 22187, East Asian Bureau of Economic Research.
  7. Thorbecke, Erik, 1991. "Adjustment, growth and income distribution in Indonesia," World Development, Elsevier, vol. 19(11), pages 1595-1614, November.
  8. Rizwana Siddiqui & Zafar Iqbal, 1999. "Social Accounting Matrix of Pakistan for 1989-90," PIDE-Working Papers 1999:171, Pakistan Institute of Development Economics.
  9. Rashid Amjad & A.R. Kemal, 1997. "Macroeconomic Policies and their Impact on Poverty Alleviation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(1), pages 39-68.
  10. Rehana Siddiqui & Rizwana Siddiqui & Zafar Iqbal, 1999. "The Impact of Tariff Reforms on Income Distribution in Pakistan: A CGE-based Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 789-804.
  11. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Cahiers de recherche 9909, Université Laval - Département d'économique.
  12. Moore, Mick & Leavy, Jennifer & Houtzager, Peter & White, Howard, 1999. "Polity qualities: how governance affects poverty," MPRA Paper 9467, University Library of Munich, Germany.
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Cited by:
  1. Abdoulaye Diagne & François Joseph Cabral & Fatou Cisse & Mamadou Dansokho & Samba Ba, 2007. "Politiques commerciales, intégration régionale, pauvreté et distribution de revenus au Sénégal/Trade Policies, Regional Integration, Poverty and Income Distribution in Senegal," Working Papers MPIA 2007-15, PEP-MPIA.
  2. Rizwana Siddiqui, 2004. "Modelling Gender Dimensions of the Impact of Economic Reforms on Time Allocation among Market Work,Household Work, and Leisure," PIDE-Working Papers 2004:185, Pakistan Institute of Development Economics.

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