The Regional Impact of Trade Liberalization on Households in Egypt, 1999-2012

This paper assesses the impact of trade liberalization in Egypt by comparing regions more exposed to trade opening compared to regions that were less exposed. As each region in Egypt (that we define as the urban or the rural part of a governorate) specializes in different production sectors, and tariff reduction varies by sector, the impact of trade liberalization on households depends on the region they live in and the sector they source their income from. This approach is relevant in the case of Egypt, as geographical mobility across regions is small. We find that trade liberalization in Egypt at a fast pace between 1999 and 2004 has been detrimental to households, while the subsequent liberalization between 2004 and 2012 had more limited effects. Poverty has declined in Egypt but less so in regions more exposed to tariff reduction. In the latter, household income has also been reduced, especially self-employment income and wages. Unskilled wages were the most affected but less so after 2004, a possible effect of labor reform in 2003. While activity and employment rates increased on average over the period, they did significantly more for skilled individuals in regions that were more protected by trade policy.