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Are The Poverty Effects of Trade Policies Invisible?


  • Verma, Monika
  • Valenzuela, Ernesto
  • Hertel, Thomas W.


With the advent of the WTO’s Doha Development Agenda, as well as the Millennium Development Goals aiming to reduce poverty by 50 percent by 2015, poverty impacts of trade reforms have attracted increasing attention. This has been particularly true of agricultural trade reform due to the importance of food in the diets of the poor, relatively higher protection in agriculture, as well as the heavy concentration of global poverty in rural areas where agriculture is the main source of income. Yet some in this debate have argued that, given the extreme volatility in agricultural commodity markets, the additional price and poverty impacts due to trade liberalization might well be undetectable. This paper formally tests this “invisibility hypothesis” via stochastic simulation of a computable general equilibrium framework. The hypothesis test is based on the comparison of two sets of price and poverty distributions. The first originates solely from the inherent variability in global staple grains markets, while the second combines the effects of this inherent variability and trade reform. Results indicate that the short-run impacts of trade liberalization on poverty are not distinguishable from market volatility in majority of the fifteen focus countries – suggesting that the poverty impacts of agricultural trade liberalization may indeed be invisible.

Suggested Citation

  • Verma, Monika & Valenzuela, Ernesto & Hertel, Thomas W., 2010. "Are The Poverty Effects of Trade Policies Invisible?," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61793, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61793

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    References listed on IDEAS

    1. William R. Cline, 2004. "Trade Policy and Global Poverty," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 379.
    2. Thomas W. Hertel & Roman Keeney & Maros Ivanic & L. Alan Winters, 2015. "Why Isn't the Doha Development Agenda more Poverty Friendly?," World Scientific Book Chapters,in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 18, pages 375-391 World Scientific Publishing Co. Pte. Ltd..
    3. Tyers,Rod & Anderson,Kym, 2011. "Disarray in World Food Markets," Cambridge Books, Cambridge University Press, number 9780521172318, March.
    4. Cranfield, J. A. L. & Preckel, Paul V. & Eales, James S. & Hertel, Thomas W., 2004. "Simultaneous estimation of an implicit directly additive demand system and the distribution of expenditure--an application of maximum entropy," Economic Modelling, Elsevier, vol. 21(2), pages 361-385, March.
    5. Ivanic, Maros & Martin, Will, 2008. "Implications of higher global food prices for poverty in low-income countries," Policy Research Working Paper Series 4594, The World Bank.
    6. Arndt, Channing, 1996. "An Introduction to Systematic Sensitivity Analysis via Gaussian Quadrature," GTAP Technical Papers 305, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    7. Keeney, Roman & Thomas Hertel, 2005. "GTAP-AGR : A Framework for Assessing the Implications of Multilateral Changes in Agricultural Policies," GTAP Technical Papers 1869, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    8. DeVuyst, Eric A. & Preckel, Paul V., 1997. "Sensitivity analysis revisited: A quadrature-based approach," Journal of Policy Modeling, Elsevier, vol. 19(2), pages 175-185, April.
    9. Maros Ivanic & Will Martin, 2008. "Implications of higher global food prices for poverty in low-income countries-super-1," Agricultural Economics, International Association of Agricultural Economists, vol. 39(s1), pages 405-416, November.
    10. Ivanic, Maros, 2004. "Reconciliation of the GTAP and Household Survey Data," GTAP Research Memoranda 1408, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    11. David O’Connor & Maria Rosa Lunati, 1999. "Economic Opening and the Demand for Skills in Developing Countries: A Review of Theory and Evidence," OECD Development Centre Working Papers 149, OECD Publishing.
    12. Alós-Ferrer, Carlos & Weidenholzer, Simon, 2008. "Contagion and efficiency," Journal of Economic Theory, Elsevier, vol. 143(1), pages 251-274, November.
    13. Hertel, Thomas W. & Keeney, Roman & Valenzuela, Ernesto, 2004. "Global Analysis Of Agricultural Trade Liberalization: Assessing Model Validity," 2004 Annual meeting, August 1-4, Denver, CO 20199, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    Cited by:

    1. Artavia, Marco & Grethe, Harald & Zimmermann, Georg, 2015. "Stochastic market modeling with Gaussian Quadratures: Do rotations of Stroud's octahedron matter?," Economic Modelling, Elsevier, vol. 45(C), pages 155-168.
    2. Verma, Monika & Hertel, Thomas W. & Preckel, Paul V., 2011. "Predicting within country household food expenditure variation using international cross-section estimates," Economics Letters, Elsevier, vol. 113(3), pages 218-220.

    More about this item


    Trade policy reform; agricultural trade; computable general equilibrium; developing countries; poverty headcount; volatility; stochastic simulation; non-parametric hypothesis testing; Financial Economics; Risk and Uncertainty; C68; F17; I32; Q17; R20;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General


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