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Trade Liberalisation, Growth and Poverty in Senegal: a Dynamic Microsimulation CGE Model Analysis

  • Nabil Annabi
  • Fatou Cissé
  • John Cockburn
  • Bernard Decaluwé

Much current debate focuses on the role of growth in alleviating poverty. However, the majority of computable general equilibrium (CGE) models used in poverty and inequality analysis are static in nature. The inability of this kind of model to account for growth (accumulation) effects makes them inadequate for long run analysis of the poverty and inequality impacts of economic policies. They exclude accumulation effects and do not allow the study of the transition path of the economy where short run policy impacts are likely to be different from those of the long run. To overcome this limitation we use a sequential dynamic CGE microsimulation model that takes into account accumulation effects and makes it possible to study poverty and inequality through time. Changes in poverty are then decomposed into growth and distribution components in order to examine whether de-protection and factor accumulation are pro-poor or not. The model is applied to Senegalese data using a 1996 social accounting matrix and a 1995 survey of 3278 households. The main findings of this study are that trade liberalisation induces small increases in poverty and inequality in the short run as well as contractions in the initially protected agriculture and industrial sectors. In the long run, it enhances capital accumulation, particularly in the service and industrial sectors, and brings substantial decreases in poverty. However, a decomposition of poverty changes shows that income distribution worsens, with greater gains among urban dwellers and the non-poor.

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Paper provided by CEPII research center in its series Working Papers with number 2005-07.

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Date of creation: May 2005
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Handle: RePEc:cii:cepidt:2005-07
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  1. Cogneau, Denis & Robilliard, Anne-Sophie, 2000. "Growth, distribution and poverty in Madagascar," TMD discussion papers 61, International Food Policy Research Institute (IFPRI).
  2. Decaluwé, Bernard & Dumont, Jean-Christophe & Savard, Luc, 2000. "Measuring Poverty and Inequality in a Computable General Equilibrium Model," Cahiers de recherche 9926, Université Laval - Département d'économique.
  3. Robilliard, Anne-Sophie & Robinson, Sherman, 1999. "Reconciling household surveys and national accounts data using a cross entropy estimation method:," TMD discussion papers 50, International Food Policy Research Institute (IFPRI).
  4. Thomas Hertel & Jeffrey Reimer, 2005. "Predicting the poverty impacts of trade reform," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 377-405.
  5. Nabil Annabi & H. Khondker Bazlul & Selim Raihan & John Cockburn & Bernard Decaluwe, 2005. "Implications of WTO Agreements and Domestic Trade Policy Reforms for Poverty in Bangladesh: Short vs. Long Run," Working Papers MPIA 2005-02, PEP-MPIA.
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  7. Davies, James B., 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. François Bourguignon & Maurizio Bussolo & Luiz A. Pereira da Silva, 2008. "The Impact of Macroeconomic Policies on Poverty and Income Distribution : Macro-Micro Evaluation Techniques and Tools," World Bank Publications, The World Bank, number 6586, September.
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  10. Ravallion, Martin & Chen, Shaohua, 2003. "Measuring pro-poor growth," Economics Letters, Elsevier, vol. 78(1), pages 93-99, January.
  11. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-66, May.
  12. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis," CSAE Working Paper Series 2002-11, Centre for the Study of African Economies, University of Oxford.
  13. John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis," Economics Series Working Papers WPS/2002-11, University of Oxford, Department of Economics.
  14. François Bourguignon & William H. Branson & Jaime de Melo, 1989. "Macroeconomic Adjustment and Income Distribution: A Macro-Micro Simulation Model," OECD Development Centre Working Papers 1, OECD Publishing.
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