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Trade Liberalization, Foreign Borrowing, Poverty And Income Distributions Of Households In Ghana



Ghana has adopted the Poverty Reduction Strategy, which emphasizes increased focus on poverty reduction in the design and implementation of its policies. Trade liberalization is one of the ways through which poverty could be reduced. However, trade liberalization results in decreased fiscal revenue of the government, which reduces public savings. However, this fiscal deficit could be financed through increased foreign borrowing, so that public savings do not fall. This study uses the CGE model and examines the impact of trade liberalization, in which lost tariff revenue is compensated by increased foreign borrowing, on the poverty and income distributions of various categories of households. The study shows that elimination of trade-related import duties accompanied by an increase in foreign borrowing, reduces the incidence, depth, and severity of poverty, whereas the elimination of export duties accompanied by an increase in foreign borrowing, increases the incidence, depth and severity of poverty. It is also shown that the income distributions of households improve when elimination of trade-related import duties are accompanied by an increase in foreign borrowing, whereas the income distributions of households worsen when elimination of export duties are accompanied by an increase in foreign borrowing.

Suggested Citation

  • Vijay K Bhasin & Camara K Obeng, 2006. "Trade Liberalization, Foreign Borrowing, Poverty And Income Distributions Of Households In Ghana," The IUP Journal of Applied Economics, IUP Publications, vol. 0(4), pages 38-53, July.
  • Handle: RePEc:icf:icfjae:v:05:y:2006:i:4:p:38-53

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    Cited by:

    1. Obeng, Camara Kwasi, 2014. "Impact of import liberalisation on poverty: a dynamic computable general equilibrium and microsimulation analysis for Ghana," MPRA Paper 58182, University Library of Munich, Germany.
    2. Joseph Forson, 2015. "Corruption, EU Aid Inflows and Economic Growth in Ghana: Cointegration and Causality Analysis," Managing Intellectual Capital and Innovation for Sustainable and Inclusive Society: Managing Intellectual Capital and Innovation; Proceedings of the MakeLearn and TIIM Joint International Conference 2, ToKnowPress.

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