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Trade liberalisation and inequalities in Nepal: A CGE analysis

  • Acharya, Sanjaya
  • Hölscher, Jens
  • Perugini, Cristiano

In this paper we examine the effects of trade liberalisation on inequality in the small developing country of Nepal. We use a Computable General Equilibrium approach applied to a newly developed social accounting matrix, simulating three liberalisation scenarios: (i) import liberalisation; (ii) export liberalisation; and (iii) import and export liberalisations implemented together under different exchange rate regimes. Outcomes reveal that industry reallocation following liberalisation does not respond to classical trade theory expectations about factor intensity and abundance. On the distributive side, liberalisation seems to increase the high-skilled/low-skilled gap and favour rich households relatively more. However, since under fixed exchange rate also the two poorest household groups increase their income levels, liberalisation may also expected to be beneficial for poverty alleviation.

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Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 29 (2012)
Issue (Month): 6 ()
Pages: 2543-2557

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Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2543-2557
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/30411

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  16. John Gilbert, . "Agricultural Trade Reform and Poverty in the Asia-Pacific: A Survey and Some New Results," MPDD Working Paper Series WP/08/01, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
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