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Remittances, trade liberalisation, and poverty in Pakistan: The role of excluded variables in poverty change analysis

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Author Info
Siddiqui, Rizwana
Kemal, A.R.

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Abstract

This paper explores the impact of two shocks, trade liberalisation policies and decline in remittances, on welfare and poverty in Pakistan. It begins by reviewing the economy, which reveals that during the Nineties although import tariffs were reduced by 55 percent, poverty however remained higher in this period than in the Eighties. At the same time, Pakistan has experienced a slow down in the inflow of remittances, which reduces the incomes of households and puts pressure on the exchange rate resulting in reduction in the inflow of imports despite a reduction in import duties. Thus, in the absence of the effects of decline in remittances, the analysis of the impact of trade liberalisation policies may render biased results. This study overcomes this constriction and analyses the impact of trade liberalisation policies in the absence and presence of decline in remittances in a CGE framework with all the features necessary for trade policy analysis with poverty and remittances linkages. The simulation results show that a decline in remittances reduces the gains from trade liberalisation. The negative impact of remittance decline dominates the positive impact of trade liberalisation in urban areas. But, the positive impact of trade liberalisation dominates the negative impact of a decline in remittances in the case of rural areas. Poverty rises in Pakistan as a whole. It shows that the decline in remittance inflows is a major contributory factor in explaining the increase in poverty in Pakistan during the Nineties.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 4228.

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Date of creation: Oct 2002
Date of revision: Oct 2006
Publication status: Published in The Pakistan Development Review 3.45(2006): pp. 383-415
Handle: RePEc:pra:mprapa:4228

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Keywords: Pakistan; Remittances; Trade Policy; CGE; Poverty;

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Find related papers by JEL classification:
C68 - Mathematical and Quantitative Methods - - Mathematical Methods and Programming - - - Computable General Equilibrium Models
F24 - International Economics - - International Factor Movements and International Business - - - Remittances
F1 - International Economics - - Trade

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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.:
  1. John Cockburn, 2004. "Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis," Development and Comp Systems 0409012, EconWPA. [Downloadable!]
  2. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May. [Downloadable!] (restricted)
  3. Clarete, Ramon L. & Whalley, John, 1988. "Interactions between trade policies and domestic distortions in a small open developing country," Journal of International Economics, Elsevier, vol. 24(3-4), pages 345-358, May. [Downloadable!] (restricted)
  4. 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. [Downloadable!]
  5. Usman Qadir & Muhammad Ali Kemal & Hasan Mohammad Mohsin, 2000. "Impact of Trade Reforms on Poverty," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 39(4), pages 1127-1137. [Downloadable!]
  6. Siddiqui, Rizwana & Kemal, A R, 2006. "Poverty-reducing or Poverty-inducing? A CGE-based Analysis of Foreign Capital Inflows in Pakistan," MPRA Paper 2283, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  7. 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. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Khondker, Bazlul H. & Raihan, Selim, 2004. "Welfare and Poverty Impacts of Policy Reforms in Bangladesh: A General Equilibrium Approach," Centre on Regulation and Competition (CRC) Working papers 30588, University of Manchester, Institute for Development Policy and Management (IDPM). [Downloadable!]
  2. Nabil Annabi & H. Khondker Bazlul & Selim Raihan & John Cockburn & Bernard Decaluwe, 2005. "Implications of WTO Agreements and Domestic Trade Policy Reforms for Poverty in Bangladesh: Short vs. Long Run," Cahiers de recherche MPIA 2005-02, PEP-MPIA. [Downloadable!]
  3. Rizwana Siddiqui, 2007. "Modelling Gender Dimensions of the Impact of Economic Reforms in Pakistan," Cahiers de recherche MPIA 2007-13, PEP-MPIA. [Downloadable!]
  4. Akhter, Naseem & Ali, Amanat, 2007. "Does Trade Liberalization Increase the Labor Demand Elasticities? Evidence from Pakistan," MPRA Paper 3881, University Library of Munich, Germany. [Downloadable!]
  5. Rizwana Siddiqui, 2008. "Income, Public Social Services, and Capability Development: A Cross-district Analysis of Pakistan," PIDE-Working Papers 2008:43, Pakistan Institute of Development Economics. [Downloadable!]
  6. Rizwana Siddiqui, 2007. "Quantifying the Impact of Development of the Transport Sector in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 46(4), pages 779-802. [Downloadable!]
  7. Butt, Muhammad Shoaib & Bandara, Jayatilleke S., 2008. "National and Regional Impacts of Increasing Non-Agricultural Market Access by Developing Countries – the Case of Pakistan," Economic Analysis and Policy (EAP), Queensland University of Technology (QUT), School of Economics and Finance, vol. 38(2), pages 277-311, September. [Downloadable!]
  8. Hasan, Lubna Hasan, 2006. "Myths and Realities of Long-run Development: A Look at Deeper Determinants," MPRA Paper 2143, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  9. Ali Cheema & Asad Sayeed, 2006. "Bureaucracy and Pro-poor Change," PIDE-Working Papers 2006:3, Pakistan Institute of Development Economics. [Downloadable!]
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