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Cooperation vs. non cooperation in the multilateral trading system: the impact on poverty and inequality in developing countries

Author

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  • Bouët, Antoine
  • Estrades, Carmen
  • Laborde, David

Abstract

The objective of this paper is to use the new version of MIRAGE, MIRAGE-HH (MIRAGE Households), to evaluate the potential impact of the Doha Development Agenda and a protectionist scenario on households’ welfare, poverty and inequality in developing countries. MIRAGE-HH is a version of the MIRAGE model of the world economy which includes households heterogeneity in order to studying the impact of trade reforms on real income and welfare at the household level. In six developing countries (Brazil, Indonesia, Pakistan, Tanzania, Uruguay and Vietnam), the model disaggregates the representative household into up to 124 households by country. The sources of income and consumption structure reflect disaggregated statistical information coming from households’ surveys. The new model better captures the behavior of the public agent in terms of revenues collected and in terms of expenditures. Various public sector closures are available. Inter-households private transfers are endogenized according to a "pure altruism" assumption (Lucas and Stark, 1985). This new version of MIRAGE allows studying the impact of various policy shocks and identifying which households are expected to win, which households are expected to lose and why, while taking into account the reaction of households to these shocks in an integrated and consistent framework. We study two contrasting scenarios, one cooperative scenario that is close to what could be the Doha Development Agenda, and one non-cooperative scenario which consists in the implementation of moderate protectionism worldwide. We calculate the impact of both trade reforms (cooperation vs non cooperation) on the real income of 87-124 households in Brazil, Indonesia, Pakistan, Tanzania, Uruguay and Vietnam, and also calculate the impact on poverty and inequality by computing the well-known FGT poverty indicators (poverty headcount, poverty gap and poverty severity) and the Gini and Theil indicators concerning income distribution.

Suggested Citation

  • Bouët, Antoine & Estrades, Carmen & Laborde, David, 2012. "Cooperation vs. non cooperation in the multilateral trading system: the impact on poverty and inequality in developing countries," Conference papers 332287, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332287
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