This paper focuses on the effects that a higher tariff on agriculture and food imports could have on poverty and the macroeconomy using a top down computable general equilibrium microsimulation model. This question is of broader relevance to developing countries that may be contemplating the use of World Trade Organisation permissible trade barriers so as to achieve a domestic policy objective. Generally speaking, the results suggest that doubling protection of agriculture and food would lead to a reallocation of labour toward the sectors with high initial protection and those with high domestic orientation. Agriculture and food sectors are harmed by increased protection if the government chooses to use indirect tax rates to compensate for revenue changes because of induced demand contraction by the indirect tax adjustment. Exports and imports in general decline. The analysis also shows that increasing food and agricultural protection has very negligible but negative effects on welfare and poverty.
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Paper provided by University of Pretoria, Department of Economics in its series Working Papers with number
200717.
Find related papers by JEL classification: D33 - Microeconomics - - Distribution - - - Factor Income Distribution D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation F17 - International Economics - - Trade - - - Trade Forecasting and Simulation I32 - Health, Education, and Welfare - - Welfare and Poverty - - - Measurement and Analysis of Poverty O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration O55 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Africa
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