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Inequality and Poverty Impacts of Trade Distortions in Mozambique

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  • Arndt, Channing
  • Thurlow, James

Abstract

Although Mozambique has considerable agricultural potential, rural poverty remains extremely high. This paper examines the extent to which global and domestic price distortions affect agricultural production and national poverty. We develop a computable general equilibrium (CGE) and micro-simulation model of Mozambique that is linked to the results of a global model. This framework is used to examine the effects of eliminating global and national price distortions. Model results indicate that agriculture is adversely affected by current trade distortions due to policies in the rest of the world. While a removal of all merchandise trade distortions would reduce import prices, it would also raise agricultural production and reduce poverty. By contrast, removing only agricultural price distortions abroad would have little effect on Mozambique’s agricultural sector. Model results indicate that Mozambique’s own distortions are also biased against agriculture, with producers of processed agricultural products enjoying high protection levels. Removing these distortions causes a significant expansion of agricultural GDP and a reduction in both poverty and inequality. Our findings therefore suggest that removing own-country and rest-of-world distortions would have positive implications for agriculture and for the overall economy in Mozambique, and in particular it would reduce its poverty and inequality.

Suggested Citation

  • Arndt, Channing & Thurlow, James, 2009. "Inequality and Poverty Impacts of Trade Distortions in Mozambique," Agricultural Distortions Working Paper Series 52794, World Bank.
  • Handle: RePEc:ags:wbadwp:52794
    DOI: 10.22004/ag.econ.52794
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    References listed on IDEAS

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    1. Channing Arndt & Sam Jones & Finn Tarp, 2006. "Aid and Development: The Mozambican Case," Discussion Papers 06-13, University of Copenhagen. Department of Economics.
    2. Arndt, Channing & Benfica, Rui & Tarp, Finn & Thurlow, James & Uaiene, Rafael, 2010. "Biofuels, poverty, and growth: a computable general equilibrium analysis of Mozambique," Environment and Development Economics, Cambridge University Press, vol. 15(1), pages 81-105, February.
    3. Arndt, Channing & Schiller, Rico & Tarp, Finn, 2001. "Grain transport and rural credit in Mozambique: solving the space-time problem," Agricultural Economics, Blackwell, vol. 25(1), pages 59-70, June.
    4. Tarp, Finn, 2006. "Aid and Development," MPRA Paper 13171, University Library of Munich, Germany.
    5. Kym Anderson & Will Martin, 2009. "Distortions to Agricultural Incentives in Asia," World Bank Publications, The World Bank, number 2611.
    6. Kym Anderson & William A. Masters, 2009. "Distortions to Agricultural Incentives in Africa," World Bank Publications, The World Bank, number 2607.
    7. Arndt, Channing & Simler, Kenneth R., 2005. "Estimating utility-consistent poverty lines," FCND discussion papers 189, International Food Policy Research Institute (IFPRI).
    8. Jensen, Tarp & Tarp, Finn, 2007. "Agricultural Technology and Marketing Margins in Vietnam," MPRA Paper 29820, University Library of Munich, Germany.
    9. Valenzuela, Ernesto & Kym Anderson, 2009. "Alternative Agricultural Price Distortions for CGE Analysis of Developing Countries, 2004 and 1980-84," GTAP Research Memoranda 2925, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    10. Valenzuela, Ernesto & Wong, Sara & Sandri, Damiano, 2007. "Distortions to Agricultural Incentives in Ecuador," Agricultural Distortions Working Paper Series 48394, World Bank.
    11. Tarp, Finn & Arndt, Channing & Jensen, Henning Tarp & Robinson, Sherman & Heltberg, Rasmus, 2002. "Facing the development challenge in Mozambique: an economywide perspective," Research reports 126, International Food Policy Research Institute (IFPRI).
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    Cited by:

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    Keywords

    Agricultural and Food Policy; International Relations/Trade;

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