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Trade reform and household welfare : the case of Mexico

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Author Info
Ianchovichina, Elena
Nicita, Alessandro
Soloaga, Isidro

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Abstract

The authors use a two-step, computationally simple procedure to analyze the effects of Mexico's potentially unilateral tariff liberalization. First, they use a computable general equilibrium model provided by the Global Trade Analysis Project (GTAP) as the new price generator. Second, they apply the price changes to Mexican household data to assess the effects of the simulated policy on poverty and income distribution. By choosing GTAP as the pricegenerator, the authors are able to model Mexico's differential tariff structure appropriately: almost zero for North American Free Trade Agreement (NAFTA) members and higher tariffs for nonmembers. Even starting with low tariff protection, simulation results show that tariff reform will have a positive effect on welfare for all expenditure deciles. Under an assumption of nonhomothetic individual preferences, trade liberalization benefits people in the poorer deciles more than those in the richer ones.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2667.

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Date of creation: 31 Aug 2001
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Handle: RePEc:wbk:wbrwps:2667

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Related research
Keywords: Health Economics&Finance; Environmental Economics&Policies; Economic Theory&Research; Services&Transfers to Poor; Payment Systems&Infrastructure; Environmental Economics&Policies; Economic Theory&Research; Poverty Assessment; Inequality; Health Economics&Finance;

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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. Lopez-Acevedo, Gladys & Salinas, Angel, 2000. "How Mexico's financial crisis affected income distribution," Policy Research Working Paper Series 2406, The World Bank. [Downloadable!]
  2. Paul Mosley & Steve Wiggins & Kerry Preibisch & Sharon Proctor, 1999. "The impact of agricultural policy liberalization on rural communities in Mexico," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(7), pages 1029-1042.
  3. Ravallion, M., 1998. "Poverty Lines in Theory and Practice," Papers 133, World Bank - Living Standards Measurement.
  4. Huff, Karen & Thomas W. Hertel, 2001. "Decomposing Welfare Changes in GTAP," GTAP Technical Papers 308, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
  5. Atkinson, A B, 1987. "On the Measurement of Poverty," Econometrica, Econometric Society, vol. 55(4), pages 749-64, July. [Downloadable!] (restricted)
  6. 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)
  7. Levy, Santiago & van Wijnbergen, Sweder, 1992. "Maize and the Free Trade Agreement between Mexico and the United States," World Bank Economic Review, Oxford University Press, vol. 6(3), pages 481-502, September.
  8. Huff, Karen & Robert McDougall & Terrie Walmsley, 1999. "Contributing Input-Output Tables to the GTAP Data Base," GTAP Technical Papers 304, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University. [Downloadable!]
  9. Foster, James E & Shorrocks, Anthony F, 1988. "Poverty Orderings," Econometrica, Econometric Society, vol. 56(1), pages 173-77, January. [Downloadable!] (restricted)
  10. Levy, Santiago, 1991. "Poverty alleviation in Mexico," Policy Research Working Paper Series 679, The World Bank. [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. Bussolo, Maurizio & Niimi, Yoko, 2006. "Do regional trade pacts benefit the poor ? An illustration from the Dominican Republic-Central American Free Trade Agreement in Nicaragua," Policy Research Working Paper Series 3850, The World Bank. [Downloadable!]
  2. Nicita, Alessandro, 2005. "Multilateral trade liberalization and Mexican households : the effect of the Doha development agenda," Policy Research Working Paper Series 3707, The World Bank. [Downloadable!]
  3. J. Francois & H. Rojas-Romagosa, 2004. "Trade Policy and the Household Distribution of Income," Tinbergen Institute Discussion Papers 04-051/2, Tinbergen Institute, revised 15 Jun 2004. [Downloadable!]
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