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Households heterogeneity in a global CGE model: an illustration with the MIRAGE-HH (MIRAGE-HouseHolds) model

Author

Listed:
  • Antoine Bouet
  • Valdete Berisha-Krasniqui

    (Larefi, Université Bordeaux IV)

  • Valdete Berisha-Krasniqui

    (IFPRI)

  • Carmen Estrades

    (IFPRI)

  • David Laborde

    (IFPRI)

Abstract

The objective of this paper is to develop a version of the MIRAGE model with household heterogeneity and a public agent, to better analyze the impact of trade liberalization and other trade reforms on real income and welfare at the household level In a first step, the model disaggregates the representative household into up to 13-39 households in five developing countries (Brazil, Pakistan, Tanzania, Uruguay and Vietnam). The sources of income and consumption structure reflect disaggregated statistical information coming from households’ surveys. The new model better captures the behavior of the public agent in terms of revenues collected and in terms of expenditures. Since domestic remittances may constitute an important determinant of income redistribution, the new version also endogenizes private inter-households transfers. This new version of MIRAGE takes into account the reaction of households to these shocks in an integrated and consistent framework. We study the impact of full trade liberalization on these households. This study concludes that: (i) while the impact of full trade liberalization may be small at the macroeconomic level, the effect on households’ real income may be quite substantial at the household level with a great heterogeneity in terms of results; (ii) the major channel of heterogenity of the impact of trade liberalization on households’ real income is productive factors’ remuneration while the channel of consumption prices of commodities has limited impact; (iii) various domestic policies simultaneously implemented to trade liberalization like modification of public transfers to households or changes in income taxation may significantly change the picture and offer compensation for negative effects of this shock or amplify direct impact of full trade liberalization; (iv) the impact of trade reform on poverty and inequality is significant and diverse from one country to the other.

Suggested Citation

  • Antoine Bouet & Valdete Berisha-Krasniqui & Valdete Berisha-Krasniqui & Carmen Estrades & David Laborde, 2013. "Households heterogeneity in a global CGE model: an illustration with the MIRAGE-HH (MIRAGE-HouseHolds) model," Larefi Working Papers 1301, Larefi, Université Bordeaux 4.
    • Handle: RePEc:laf:wpaper:cr1301
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    1. repec:hal:spmain:info:hdl:2441/45eb019724sn6sg9melpggksl is not listed on IDEAS
    2. Ali Bayar & Barbara Bratta & Silvia Carta & Paolo Di Caro & Marco Manzo & Carlo Orecchia, 2021. "Assessing the effects of VAT policies with an integrated CGE-microsimulation approach: evidence on Italy," Working Papers wp2021-14, Ministry of Economy and Finance, Department of Finance.
    3. Liyanaarachchi, Tilak S. & Naranpanawa, Athula & Bandara, Jayatilleke S., 2016. "Impact of trade liberalisation on labour market and poverty in Sri Lanka. An integrated macro-micro modelling approach," Economic Modelling, Elsevier, vol. 59(C), pages 102-115.
    4. Khan, Muhammad Aamir, 2017. "Regional Trade and Economic Development: Options for Pakistan," Conference papers 332899, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    5. van Ruijven, Bas J. & O’Neill, Brian C. & Chateau, Jean, 2015. "Methods for including income distribution in global CGE models for long-term climate change research," Energy Economics, Elsevier, vol. 51(C), pages 530-543.
    6. Mathilde Douillet, 2012. "Trade policies and agriculture in Sub-Saharan Africa: Comparative analysis in a Computable General Equilibrium framework," Sciences Po publications info:hdl:2441/45eb019724s, Sciences Po.
    7. Lindsay Shutes & Marijke Kuiper, 2015. "Expanding the household coverage of global simulation models: an application to Ghana," FOODSECURE Technical papers 3, LEI Wageningen UR.
    8. Douillet, Mathilde, 2012. "Trade and agricultural policies in Malawi: Not all policy reform is equally good for the poor," MPRA Paper 40948, University Library of Munich, Germany.
    9. Garaffa, Rafael & Cunha, Bruno S.L. & Cruz, Talita & Bezerra, Paula & Lucena, André F.P. & Gurgel, Angelo C., 2021. "Distributional effects of carbon pricing in Brazil under the Paris Agreement," Energy Economics, Elsevier, vol. 101(C).
    10. Roland Cunha Montenegro & Vidas Lekavičius & Jurica Brajković & Ulrich Fahl & Kai Hufendiek, 2019. "Long-Term Distributional Impacts of European Cap-and-Trade Climate Policies: A CGE Multi-Regional Analysis," Sustainability, MDPI, vol. 11(23), pages 1-26, December.

    More about this item

    Keywords

    CGE modeling; poverty; trade liberalization; households survey;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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