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Trade liberalisation and inequalities in Nepal: A CGE analysis

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

Abstract

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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  • Acharya, Sanjaya & Hölscher, Jens & Perugini, Cristiano, 2012. "Trade liberalisation and inequalities in Nepal: A CGE analysis," Economic Modelling, Elsevier, vol. 29(6), pages 2543-2557.
    • Handle: RePEc:eee:ecmode:v:29:y:2012:i:6:p:2543-2557
    DOI: 10.1016/j.econmod.2012.08.008
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    Cited by:

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    2. van Ruijven, Bas J. & O’Neill, Brian C. & Chateau, Jean, 2015. "Methods for including income distribution in global CGE models for long-term climate change research," Energy Economics, Elsevier, vol. 51(C), pages 530-543.
    3. Zembele, Adwell, 2022. "A General Equilibrium Analysis Of The Potential Effects Of The African Continental Free Trade Area On The Malawi Economy," Conference papers 333393, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    4. Nimesh Salike & Benli Lu, 2015. "An Examination of Nepal’s Export Choice based on Revealed Comparative Advantage," NRB Economic Review, Nepal Rastra Bank, Research Department, vol. 27(1), pages 75-89, April.
    5. Mahadevan, Renuka & Nugroho, Anda & Amir, Hidayat, 2017. "Do inward looking trade policies affect poverty and income inequality? Evidence from Indonesia's recent wave of rising protectionism," Economic Modelling, Elsevier, vol. 62(C), pages 23-34.
    6. Swapan K. Bhattacharya & Gouranga G. Das, 2014. "Can South–South Trade Agreements Reduce Development Deficits?," Journal of South Asian Development, , vol. 9(3), pages 253-285, December.
    7. Nimesh Salike & Benli Lu, 2015. "An Examination of Nepal's Export Choice based on Revealed Comparative Advantage," NRB Economic Review, Nepal Rastra Bank, Economic Research Department, vol. 27(1), pages 75-89, April.
    8. Sanjaya Acharya & Mohamed Ileas Mia, 2020. "Inflation, Growth, and Distribution Nexus in Post-Transition and Emerging Economies of South Asia," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 3, pages 368-383, September.

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    More about this item

    Keywords

    Trade liberalisation; Inequality; CGE model; Nepal;
    All these keywords.

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • N75 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services - - - Asia including Middle East
    • F15 - International Economics - - Trade - - - Economic Integration

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