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Poverty and Inequality Analysis within a CGE Framework: A Comparative Analysis of the Representative Agent and Microsimulation Approaches

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  • Luc Savard

Abstract

Two approaches have emerged in the use of CGE models in poverty and income distribution analysis: the traditional representative agent and the microsimulation approach using a large number of households to capture more heterogeneity. This article uses three simple CGE models with representative agent and microsimulation approaches to verify whether the two methods produce compatible results. The use of microsimulation does not appear to lead to different results or contribute significant value-added in impact analysis at the macroeconomic and sectoral levels. However, when poverty and inequality are the focus, the results produced by the two approaches are inverted, revealing that the choice of approach is crucial when the objective of the analysis relates to poverty and inequality. Copyright Overseas Development Institute, 2005.

Suggested Citation

  • Luc Savard, 2005. "Poverty and Inequality Analysis within a CGE Framework: A Comparative Analysis of the Representative Agent and Microsimulation Approaches," Development Policy Review, Overseas Development Institute, vol. 23(3), pages 313-331, May.
  • Handle: RePEc:bla:devpol:v:23:y:2005:i:3:p:313-331
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    References listed on IDEAS

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    1. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    2. Jean-Marc Montaud, 2003. "Dotations en capital et pauvreté des ménages au Burkina Faso : une analyse en Équilibre Général Calculable," Revue d’économie du développement, De Boeck Université, vol. 11(1), pages 43-71.
    3. Dorothée Boccanfuso & Bernard Decaluwé & Luc Savard, 2003. "Poverty, Income Distribution and CGE Modeling: Does the Functional Form of Distribution Matter?," Cahiers de recherche 0332, CIRPEE.
    4. BUSSOLO Maurizio & LAY Jann, "undated". "Globalization and Poverty Changes in Colombia," EcoMod2003 330700029, EcoMod.
    5. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Cahiers de recherche 9909, Université Laval - Département d'économique.
    6. Jean-Marc Montaud, 2000. "Dotations en capital et pauvreté des ménages au Burkina Faso : une analyse en équilibre général calculable," Documents de travail 50, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
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    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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