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Poverty Analysis Using an International Cross-Country Demand System

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  • Cranfield, John
  • Preckel, Paul
  • Hertel, Thomas

Abstract

This paper proposes a new method for ex ante analysis of the poverty impacts arising from policy reforms. Three innovations underlie this approach. The first is the estimation of a global demand system using a combination of micro-data from household surveys, and macro-data from the International Comparisons Project. The second innovation relates to a methodology for post-estimation calibration of the global demand system, giving rise to country specific demand systems and an associated expenditure function which, when aggregated across the expenditure distribution, reproduce observed per capita budget shares exactly. The third innovation is use of the calibrated expenditure function to calculate the change in the head-count of poverty, poverty gap and squared poverty gap arising from policy reforms, where the poverty measures are derived using a unique poverty level of utility, rather than an income or expenditure-based measure. We employ these techniques with a demand system for food, other non-durables and services estimated using a combination of 1996 ICP data set and national expenditure distribution data. To illustrate the usefulness of these calibrated models for policy analysis, we assess the impacts of an assumed five percent food price rise as might be following a multilateral trade agreement.

Suggested Citation

  • Cranfield, John & Preckel, Paul & Hertel, Thomas, 2006. "Poverty Analysis Using an International Cross-Country Demand System," GTAP Working Papers 2211, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
  • Handle: RePEc:gta:workpp:2211
    Note: GTAP Working Paper No. 34
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    File URL: https://www.gtap.agecon.purdue.edu/resources/res_display.asp?RecordID=2211
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    Cited by:

    1. ., 2012. "Socio-economic impact of regional transport infrastructure in the Greater Mekong Subregion," Chapters,in: Infrastructure for Asian Connectivity, chapter 4, pages 95-138 Edward Elgar Publishing.
    2. Will Martin & Kym Anderson, 2008. "Agricultural trade reform under the Doha Agenda: some key issues ," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 52(1), pages 1-16, March.
    3. Stone, Susan & Strutt, Anna & Hertel, Thomas, 2010. "Assessing Socioeconomic Impacts of Transport Infrastructure Projects in the Greater Mekong Subregion," ADBI Working Papers 234, Asian Development Bank Institute.
    4. Verma, Monika & Hertel, Thomas W. & Preckel, Paul V., 2011. "Predicting within country household food expenditure variation using international cross-section estimates," Economics Letters, Elsevier, vol. 113(3), pages 218-220.
    5. Nicole Hassoun, 2010. "Another Mere Addition Paradox? Some Reflections on Variable Population Poverty Measurement," WIDER Working Paper Series 120, World Institute for Development Economic Research (UNU-WIDER).
    6. Paul Preckel & J. A. L. Cranfield & Thomas Hertel, 2010. "A modified, implicit, directly additive demand system," Applied Economics, Taylor & Francis Journals, vol. 42(2), pages 143-155.
    7. World Bank, 2013. "Nicaragua Agriculture Public Expenditure Review
      [Nicaragua - Análisis del gasto público agropecuario y forestal]
      ," World Bank Other Operational Studies 21542, The World Bank.

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