Advanced Search
MyIDEAS: Login

Fiscal Policies and Increased Trade Openness: Poverty Impacts in Ecuador

Contents:

Author Info

  • Sara Wong
  • Ricardo Arguello
  • Ketty Rivera

Abstract

This research quantifies the effects on poverty in Ecuador of bilateral trade liberalization with the U.S. and fiscal changes (value added tax and direct taxes) which seek to compensate tariff revenue losses, so that the government deficit remains constant. This is a very important issue for Ecuador because it adopted the U.S. dollar as its currency in 2000, forgoting the use of monetary and exchange rate policy instruments. This paper highlights labor market effects and fiscal policies as the main mechanisms through which trade impacts poverty. The paper combines a reduced-form micro household income and occupational choice model (using the 2005/6 Ecuadorian household survey) with a standard single-country computable general equilibrium model (employing a 2004 Social Accounting Matrix). A sequential approach that simulates the full income and distributional impact of trade and tax policies is followed. The impact of these policy changes on the economy is small. Indigence and income distribution effects are small but positive. There are mixed results on poverty. The best poverty reduction outcomes are attained when only direct taxes are used for making up tariff revenue losses and the worst when a flat VAT rate is employed, including the elimination of current VAT exemptions (mostly for agricultural goods). A key contribution of this research is to illustrate the significance for poverty of policy choices available to the government.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://portal.pep-net.org/documents/download/id/13519
Download Restriction: no

Bibliographic Info

Paper provided by PEP-MPIA in its series Working Papers MPIA with number 2008-19.

as in new window
Length:
Date of creation: 2008
Date of revision:
Handle: RePEc:lvl:mpiacr:2008-19

Contact details of provider:
Postal: Pavillon J.A. De Seve, Québec, Québec, G1V 0A6
Phone: 1-418-656-2131, ext. 2697
Fax: 1-418-656-7798
Email:
Web page: http://www.pep-net.org
More information through EDIRC

Related research

Keywords: Poverty; free trade agreement; fiscal policy; CGE; micro simulation;

Find related papers by JEL classification:

References

References listed on IDEAS
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.:
as in new window
  1. Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
  2. Robilliard, Anne-Sophie & Robinson, Sherman, 2005. "The social impact of a WTO agreement in Indonesia," Policy Research Working Paper Series 3747, The World Bank.
  3. François Bourguignon & Anne-Sophie Robilliard & Sherman Robinson, 2003. "Representative versus real households in the macro-economic modeling of inequality," DELTA Working Papers 2003-05, DELTA (Ecole normale supérieure).
  4. Bourguignon, François & Robilliard, Anne-Sophie & Robinson, Sherman, 2008. "Examining the Social Impact of the Indonesian Financial Crisis Using a Macro-Micro Model," Economics Papers from University Paris Dauphine 123456789/5130, Paris Dauphine University.
  5. Fields, Gary S, 1989. "Changes in Poverty and Inequality in Developing Countries," World Bank Research Observer, World Bank Group, vol. 4(2), pages 167-85, July.
  6. Ravallion, Martin, 2001. "Growth, inequality, and poverty : looking beyond averages," Policy Research Working Paper Series 2558, The World Bank.
  7. Angus Deaton & Salman Zaidi, 1999. "Guidelines for Constructing Consumption Aggregates For Welfare Analysis," Working Papers 217, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  8. Luc Savard, 2003. "Poverty and Income Distribution in a CGE-Household Micro-Simulation Model: Top-Down/Bottom Up Approach," Cahiers de recherche 0343, CIRPEE.
  9. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
  10. Davies, James B., 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
Full references (including those not matched with items on IDEAS)

Citations

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:lvl:mpiacr:2008-19. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Johanne Perron).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.