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The poverty impacts of the Doha Round in Cameroon : the role of tax policy

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  • Emini, Christian Arnault
  • Cockburn, John
  • Decaluwe, Bernard

Abstract

The authors aim to assess the possible impacts of the Doha Round of negotiations on poverty in Cameroon. During the recent period of economic recovery, Cameroon enjoyed a sharp decline in poverty, with the headcount index falling from 53.3 percent of inhabitants in 1996 to 40.2 percent in 2001, mostly due to economic growth rather than redistribution. Will the current trade negotiations under the Doha Round reinforce or curb this trend? They apply a computable general equilibrium (CGE) microsimulation model that involves 10,992 households in order to address this question. The authors find the Doha Round to be poverty-reducing for Cameroon. For the whole country, the estimate of the net number of people who are lifted out of poverty is 22,000 following this scenario. Further investigations indicate that more ambitious world trade liberalization leads to greater poverty alleviation at the national level, while Cameroon's domestic trade liberalization has adverse poverty and inequality impacts-despite giving rise to higher aggregate welfare. Under the Doha scenario, the cuts in Cameroon's tariffs are very small (the average tariff rate moves from 11.79 percent in the base run to merely 11.66 percent) so that world trade liberalization effects on prices more than offset the adverse own liberalization effects in this scenario. If the rest of the world and Cameroon full trade liberalizations are combined, the adverse impacts of own liberalization outweigh the favorable outcomes of the world trade liberalization. The results suggest furthermore that the choice of tax replacement instrument can have an important bias in poverty impacts: poverty gets worse in the country case study when using an imperfect value-added tax instead of a neutral replacement tax to compensate lost tariff revenue, and gets even worse when using a consumption tax. Key reasons here are the supplementary distortions which are nil in case of a neutral tax and greatest in the case of a consumption tax. In addition, accompanying measures should be considered to avoid poverty increases in the framework of Economic Partnership Agreements currently in negotiation between African, Caribbean, and Pacific (ACP) countries and the European Union, which propose a drastic dismantlement of ACP tariffs over the next few years.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3746.

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Date of creation: 01 Oct 2005
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Handle: RePEc:wbk:wbrwps:3746

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Keywords: Rural Poverty Reduction; Economic Theory&Research; Free Trade; Poverty Assessment; Achieving Shared Growth;

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  1. Dollar, David & Kraay, Aart, 2002. " Growth Is Good for the Poor," Journal of Economic Growth, Springer, Springer, vol. 7(3), pages 195-225, September.
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Cited by:
  1. Kamel Louhichi & Hugo Valin, 2012. "Impact of EU biofuel policies on the French arable sector: A micro-level analysis using global market and farm-based supply models," Review of Agricultural and Environmental Studies - Revue d'Etudes en Agriculture et Environnement, INRA Department of Economics, INRA Department of Economics, vol. 93(3), pages 233-272.
  2. Alia, Didier & Ndjana, Willy & Nghogue, Erith, 2009. "Construction d'un MEGC pour l'évaluation de l'impact de la politique économique au Cameroun sur le secteur informel et la pauvreté
    [Evaluation of the effects of economic policies on informal sec
    ," MPRA Paper 30339, University Library of Munich, Germany.
  3. Aline Coudouel & Stefano Paternostro, 2006. "Analyzing the Distributional Impact of Reforms : A Practitioner’s Guide to Pension, Health, Labor Markets, Public Sector Downsizing, Taxation, Decentralization, and Macroeconomic Modeling, Volume 2," World Bank Publications, The World Bank, number 7041, August.
  4. Hertel, Thomas W. & Winters, L. Alan, 2005. "Poverty impacts of a WTO agreement : synthesis and overview," Policy Research Working Paper Series 3757, The World Bank.
  5. Behrman, Jere R., 2009. "Analyzing the Distributional Impact of Reforms, Volume Two: A Practitioner's Guide to Pension, Health, Labor Market, Public Sector Downsizing, Taxation, Decentralization, and Macroeconomic Modeling. A," Journal of Pension Economics and Finance, Cambridge University Press, Cambridge University Press, vol. 8(03), pages 396-397, July.
  6. Paolo Giordano & Kun Li, 2012. "An Updated Assessment of the Trade and Poverty Nexus in Latin America," IDB Publications 79119, Inter-American Development Bank.
  7. Essama-Nssah, B. & Bassole, Leandre, 2010. "A counterfactual analysis of the poverty impact of economic growth in Cameroon," Policy Research Working Paper Series 5249, The World Bank.
  8. Anonymous, 2009. "Journal of International Agricultural Trade and Development, Volume 5, Issue 1," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 5(1).
  9. Hertel, Thomas W. & Keeney, Roman & Ivanic, Maros & Winters, L. Alan, 2006. "Distributional effects of WTO agricultural reforms in rich and poor countries," Policy Research Working Paper Series 4060, The World Bank.
  10. Essama-Nssah, B., 2005. "The poverty and distributional impact of macroeconomic shocks and policies : a review of modeling approaches," Policy Research Working Paper Series 3682, The World Bank.
  11. Essama-Nssah, , B. & Bassol3, Leandre & Paul, Saumik, 2010. "Accounting for heterogeneity in growth incidence in Cameroon," Policy Research Working Paper Series 5464, The World Bank.
  12. Walkenhorst, Peter & Cattaneo, Olivier, 2006. "Trade, Diversification and Growth in Nigeria," MPRA Paper 23735, University Library of Munich, Germany.

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