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Trade Reform and Poverty in the Philippines: a Computable General Equilibrium Microsimulation Analysis

Author

Listed:
  • Caesar B. Cororaton
  • John Cockburn

Abstract

The paper employs an integrated CGE-microsimulation approach to analyze the poverty effects of tariff reduction. The results indicate that the tariff cuts implemented between 1994 and 2000 were generally poverty-reducing, primarily through the substantial reduction in consumer prices they engendered. However, the reduction is much greater in the National Capital Region (NCR), where poverty incidence is already lowest, than in other areas, especially rural, where poverty incidence is highest. Tariff cuts lower the cost of local production and bring about real exchange rate depreciation. Since the non-food manufacturing sector dominates exports in terms of export share and export intensity, the general equilibrium effects of tariff reduction is an expansion of this sector and a contraction in the agricultural sector. This, in turn, leads to an increase in the relative returns to factors, such as capital, used intensively in the non-food manufacturing sector and a fall in returns to unskilled labor. As rural households depend more on unskilled labor income, income inequality worsens as a result.

Suggested Citation

  • Caesar B. Cororaton & John Cockburn, 2005. "Trade Reform and Poverty in the Philippines: a Computable General Equilibrium Microsimulation Analysis," Cahiers de recherche 0513, CIRPEE.
  • Handle: RePEc:lvl:lacicr:0513
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    File URL: http://www.cirpee.org/fileadmin/documents/Cahiers_2005/CIRPEE05-13.pdf
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    References listed on IDEAS

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    1. 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.
    2. Luc Savard, 2005. "Poverty and Inequality Analysis within a CGE Framework: A Comparative Analysis of the Representative Agent and Microsimulation Approaches," Development Policy Review, Overseas Development Institute, vol. 23(3), pages 313-331, May.
    3. Cororaton, Caesar B., 2003. "Analyzing the Impact of Trade Reforms on Welfare and Income Distribution Using CGE Framework: The Case of the Philippines," Discussion Papers DP 2003-01, Philippine Institute for Development Studies.
    4. Decaluwé, Bernard & Dumont, Jean-Christophe & Savard, Luc, 2000. "Measuring Poverty and Inequality in a Computable General Equilibrium Model," Cahiers de recherche 9926, Université Laval - Département d'économique.
    5. Cogneau, Denis & Robilliard, Anne-Sophie, 2000. "Growth, distribution and poverty in Madagascar," TMD discussion papers 61, International Food Policy Research Institute (IFPRI).
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Arief Anshory Yusuf, 2008. "INDONESIA-E3: An Indonesian Applied General Equilibrium Model for Analyzing the Economy, Equity, and the Environment," Working Papers in Economics and Development Studies (WoPEDS) 200804, Department of Economics, Padjadjaran University, revised Sep 2008.
    2. Arief Anshory Yusuf, 2006. "Constructing Indonesian Social Accounting Matrix for Distributional Analysis in the CGE Modelling Framework," Working Papers in Economics and Development Studies (WoPEDS) 200604, Department of Economics, Padjadjaran University, revised Nov 2006.
    3. Caesar B. Cororaton & Erwin L. Corong, 2006. "Agriculture-sector Policies and Poverty in the Philippines: a Computable General-Equilibrium (CGE) Analysis," Working Papers MPIA 2006-09, PEP-MPIA.
    4. Cororaton, Caesar B. & Cockburn, John, 2007. "Trade reform and poverty--Lessons from the Philippines: A CGE-microsimulation analysis," Journal of Policy Modeling, Elsevier, vol. 29(1), pages 141-163.
    5. Arief Anshory Yusuf & Budy P. Resosudarmo, 2007. "On the Distributional Effect of Carbon Tax in Developing Countries: The Case of Indonesia," Working Papers in Economics and Development Studies (WoPEDS) 200705, Department of Economics, Padjadjaran University, revised Aug 2007.
    6. Giulia COLOMBO, "undated". "The Effects of DR-CAFTA in Nicaragua: A CGE-Microsimulation Model for Poverty and Inequality Analysis," EcoMod2008 23800025, EcoMod.
    7. Yusuf, Arief Anshory & Resosudarmo, Budy P., 2007. "Searching for Equitable Energy Price Reform for Indonesia," MPRA Paper 1946, University Library of Munich, Germany.
    8. Lindsay Shutes & Marijke Kuiper, 2015. "Expanding the household coverage of global simulation models: an application to Ghana," FOODSECURE Technical papers 3, LEI Wageningen UR.
    9. Colombo, Giulia, 2008. "The Effects of DR-CAFTA in Nicaragua A CGE-Microsimulation Model for Poverty and Inequality Analysis," Proceedings of the German Development Economics Conference, Zurich 2008 6, Verein für Socialpolitik, Research Committee Development Economics.
    10. Shutes, Lindsay & Ganesh-Kumar, Anand & Meijerink, Gerdien W., 2012. "Fluctuating staple prices and household poverty in India," MPRA Paper 40982, University Library of Munich, Germany.
    11. Colombo, Giulia, 2008. "Linking CGE and Microsimulation Models: A Comparison of Different Approaches," ZEW Discussion Papers 08-054, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Giulia Colombo, 2010. "Linking CGE and microsimulation models: a comparison of different approaches," International Journal of Microsimulation, International Microsimulation Association, vol. 3(1), pages 72-91.
    13. Acharya, Sanjaya & Hölscher, Jens & Perugini, Cristiano, 2012. "Trade liberalisation and inequalities in Nepal: A CGE analysis," Economic Modelling, Elsevier, vol. 29(6), pages 2543-2557.

    More about this item

    Keywords

    Dynamic CGE model; trade liberalisation; poverty; inequality; Senegal;

    JEL classification:

    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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