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Income Distribution and Poverty in a CGE Framework: A Proposed Methodology

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  • Sothea OUM

    () (Economic Research Institute for ASEAN and East Asia (ERIA), Indonesia Centre of Policy Studies, Monash University, Australia)

Abstract

The paper discusses methodologies addressing income distribution and poverty in a Computable General Equilibrium (CGE) model framework, by describing how to link CGE results with household survey data to analyze income distribution and poverty implications. The most basic approach is simply to fit the household income/expenditure to the survey data by suitable parametric distribution functions. The post-simulation poverty indices can be estimated by either assuming that the income of each individual household within the group moves proportionally with the group's mean income, or by our proposed elasticity method. In our proposed method, we use the elasticity estimated from existing surveys to calculate the change in expenditure of each subgroup category in response to change in the household category's mean consumption, supplied by the core model's simulation, to derive post-simulation poverty indices. Our approach may better capture intra-group income distribution of households and moderate gains or losses in welfare from economic growths.

Suggested Citation

  • Sothea OUM, 2009. "Income Distribution and Poverty in a CGE Framework: A Proposed Methodology," Working Papers d021, Economic Research Institute for ASEAN and East Asia (ERIA).
  • Handle: RePEc:era:wpaper:d021
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    File URL: http://www.eria.org/ERIA-DP-2009-18.pdf
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    Cited by:

    1. Ditya Agung Nurdianto, 2016. "Economic Impacts of a Carbon Tax in an Integrated ASEAN," EEPSEA Special and Technical Paper tp201604t5, Economy and Environment Program for Southeast Asia (EEPSEA), revised Apr 2016.
    2. Boccanfuso, Dorothée & Richard, Patrick & Savard, Luc, 2013. "Parametric and nonparametric income distribution estimators in CGE micro-simulation modeling," Economic Modelling, Elsevier, vol. 35(C), pages 892-899.

    More about this item

    Keywords

    Computable General Equilibrium; Income Distribution; Poverty.;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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