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Welfare and Poverty Impacts of Policy Reforms in Bangladesh: A General Equilibrium Approach

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  • Khondker, Bazlul H.
  • Raihan, Selim

Abstract

Our study assesses the impacts of different policy reforms, such as domestic trade liberalisation, implementation of WTO agreements in the textile sector and WTO negotiations on the movement of natural persons, and examines their welfare and poverty implications at the household level in the economy of Bangladesh. We use a comparative static computable general equilibrium (CGE) model based on the 1995-96 Social Accounting Matrix (SAM) of the Bangladesh economy. This study carries out three simulations. The first simulation entails full liberalisation of tariffs and the resultant reduction in government revenues are mobilised by enhancing the existing production taxes and imposing new taxes on construction sector; in the second simulation, export of ready-made garments (RMG) are reduced by 25 percent; and in the third simulation the remittances are increased by 50 percent. Equivalent variations (EVs) and Foster-Greer-Thorbecke (FGT) measures are applied to estimate welfare and poverty changes respectively. The prime observation is that rural poverty, as measured by the head count ratio, is observed to increase under all three simulations. The gap and severity of the rural poor have also worsened in all three simulations indicating worse poverty profiles for the rural poor compared to the base-run scenario. Urban head count poverty has also deteriorated in the first and second simulations, while has improved only in the third simulation. The gap and severity of poverty for the urban population have, however, deteriorated in all three simulations.

Suggested Citation

  • Khondker, Bazlul H. & Raihan, Selim, 2004. "Welfare and Poverty Impacts of Policy Reforms in Bangladesh: A General Equilibrium Approach," Centre on Regulation and Competition (CRC) Working papers 30588, University of Manchester, Institute for Development Policy and Management (IDPM).
    • Handle: RePEc:ags:idpmcr:30588
    DOI: 10.22004/ag.econ.30588
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    References listed on IDEAS

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    Cited by:

    1. Bodrun Nahar & Mahinda Siriwardana, 2009. "Impact of Trade Liberalization on Poverty in Bangladesh," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 10(2), pages 325-369, July.
    2. Nahar, Bodrun & Siriwardana, Mahinda, 2009. "Trade Liberalisation and Poverty in Bangladesh: A General Equilibrium Approach," 2009 Conference (53rd), February 11-13, 2009, Cairns, Australia 47629, Australian Agricultural and Resource Economics Society.
    3. Mohammad Alam & Jeroen Buysse & Ismat Begum & Stephan Nolte & Eric Wailes & Guido Van Huylenbroeck, 2015. "Impact of trade liberalization and world price changes in Bangladesh: a computable general equilibrium analysis," Agricultural and Food Economics, Springer;Italian Society of Agricultural Economics (SIDEA), vol. 4(1), pages 1-22, December.
    4. Raihan, Selim, 2008. "Trade Liberalization and Poverty in Bangladesh," MPRA Paper 37905, University Library of Munich, Germany.

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