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Distributional Effects of the Panama Canal Expansion

  • Maurizio Bussolo

    ()

  • Rafael de Hoyos
  • Denis Medvedev

This paper uses a dynamic macro-micro framework to evaluate the potential distributional effects of the expansion of the Panama Canal. The results show that large macroeconomic effects are only likely during the operations phase (2014 and onwards), and income gains are likely to be concentrated at the top of the income distribution. The additional foreign exchange inflows during construction and operations phases result in the loss of competitiveness of non-Canal sectors (Dutch disease) and in higher domestic prices which hurt the poorest consumers. In addition, the construction and operation activities increase demand for more educated non-farm formal workers. Although these changes encourage additional labor movement out of agriculture and from the informal to the formal sector, much of the impact is manifested in growing wage disparities and widening income inequality. Using the additional revenues of the Canal expansion in a targeted cash transfer program such as Red de Oportunidades", the Government of Panama could offset the adverse distributional effects and eradicate extreme poverty. "

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Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2012)
Issue (Month): ()
Pages:

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Handle: RePEc:col:000425:010030
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  1. Ravallion, Martin & Chen, Shaohua & Sangraula, Prem, 2007. "New evidence on the urbanization of global poverty," Policy Research Working Paper Series 4199, The World Bank.
  2. Michael Lokshin & Ruslan Yemtsov, 2005. "Has Rural Infrastructure Rehabilitation in Georgia Helped the Poor?," World Bank Economic Review, World Bank Group, vol. 19(2), pages 311-333.
  3. Ferreira, Francisco H. G. & Leite, Phillippe G., 2003. "Policy options for meeting the Millennium Development Goals in Brazil : can micro-simulations help?," Policy Research Working Paper Series 2975, The World Bank.
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