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Poverty impacts of increased openness and fiscal policies in a dollarized economy: a CGE-micro approach for Ecuador

  • Sara Wong

    ()

  • Ricardo Arguello

    ()

  • Ketty Rivera

We quantify the effects on poverty and income distribution in Ecuador of bilateral tradeliberalization with the US and a budget-neutral value added tax increase which seeks to compensatetariff revenue losses. We stress the study of fiscal policies that the government couldtap in order to compensate for tariff revenue loss. This is a very important issue for Ecuadorbecause this country adopted the US dollar as its currency in 2000, forgiving the use of importantpolicy instruments. To study these issues we combine a reduced-form micro householdincome and occupational choice model (using 2005/6 data from the Ecuadorian LSMS) with astandard single-country computable general equilibrium model (employing a 2004 SAM). Wefollow a sequential approach that simulates the full distributional impact of trade and tax policies.We find that the impact of these policy changes on extreme poverty and income distributionis small but positive.

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Paper provided by UNIVERSIDAD DEL ROSARIO in its series DOCUMENTOS DE TRABAJO with number 004367.

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Length: 50
Date of creation: 25 Nov 2007
Date of revision:
Handle: RePEc:col:000092:004367
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  1. François Bourguignon & Anne-Sophie Robilliard & Sherman Robinson, 2003. "Representative versus real households in the macro-economic modeling of inequality," DELTA Working Papers 2003-05, DELTA (Ecole normale supérieure).
  2. Go, Delfin S. & Kearney, Marna & Robinson, Sherman & Thierfelder, Karen, 2005. "An Analysis of South Africa's Value Added Tax," Policy Research Working Paper Series 3671, The World Bank.
  3. Carolina Sanchez-Paramo, 2005. "Poverty in Ecuador," World Bank Other Operational Studies 10333, The World Bank.
  4. Maurizio Bussolo & Jann Lay, 2003. "Globalisation and Poverty Changes in Colombia," OECD Development Centre Working Papers 226, OECD Publishing.
  5. Deaton, A. & Zaidi, S., 1999. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," Papers 192, Princeton, Woodrow Wilson School - Development Studies.
  6. Robilliard, Anne-Sophie & Robinson, Sherman, 2005. "The social impact of a WTO agreement in Indonesia," Policy Research Working Paper Series 3747, The World Bank.
  7. 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.
  8. Löfgren, Hans & Harris, Rebecca Lee & Robinson, Sherman, 2001. "A standard computable general equilibrium (CGE) model in GAMS," TMD discussion papers 75, International Food Policy Research Institute (IFPRI).
  9. Loayza, Norman V. & Rigolini, Jamele, 2006. "Informality trends and cycles," Policy Research Working Paper Series 4078, The World Bank.
  10. Rob Vos & Niek De Jong, 2003. "Trade Liberalization and Poverty in Ecuador: A CGE Macro-Microsimulation Analysis," Economic Systems Research, Taylor & Francis Journals, vol. 15(2), pages 211-232.
  11. André Fargeix & Elisabeth Sadoulet, 1990. "A Financial Computable General Equilibrium Model for the Analysis of Ecuador's Stabilization Programs," OECD Development Centre Working Papers 10, OECD Publishing.
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