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Welfare and Poverty Impacts of Tariff Reforms in Bangladesh: a General Equilibrium Approach

Author

Listed:
  • Bazlul Khondker
  • Mustafa Mujeri
  • Selim Raihan

Abstract

This paper examined welfare and poverty impacts of trade liberalization in Bangladesh. By using a computable general equilibrium model based on a social accounting matrix, an empirical investigation of the transmission channels linking trade liberalisation to the rest of the economy was carried out by conducting three simulations. In the first two simulations full tariff removal was accompanied by respective increase in production tax rates and income tax rate to ensure revenue neutrality. Third simulation resembles the actual tariff reforms undertaken in the country. This entailed the decline in both the spread and effective average duty rates, thereby reducing the mean rates and variance. The patterns of welfare losses are progressive for rural households but regressive for urban households in the first two simulations. In the third simulation, a clear regressive pattern is observed amont the urban households but it is ambiguous for the rural households. Rural poverty declined due to tariff-income tax reforms and tariff rationalization but worsened in the case of tariff-production tax reforms. Except for the second simulation, the urban poverty headcount, gap and severity all worsen in other two simulations. This confirms that the benefits of tariff rationalization accrue more to the urban rich households compared to their poored counterparts.

Suggested Citation

  • Bazlul Khondker & Mustafa Mujeri & Selim Raihan, 2006. "Welfare and Poverty Impacts of Tariff Reforms in Bangladesh: a General Equilibrium Approach," Working Papers MPIA 2006-05, PEP-MPIA.
  • Handle: RePEc:lvl:mpiacr:2006-05
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    File URL: https://portal.pep-net.org/documents/download/id/13526
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    References listed on IDEAS

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    1. Foster, James & Greer, Joel & Thorbecke, Erik, 1984. "A Class of Decomposable Poverty Measures," Econometrica, Econometric Society, vol. 52(3), pages 761-766, May.
    2. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Cahiers de recherche 9909, Université Laval - Département d'économique.
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    Cited by:

    1. 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.
    2. Alam, Mohammad Jahangir & Bhuiyan, Nazmul & Begum, Ismat Ara & Van Huylenbroeck, Guido, 2012. "Tracing the Poverty Impact of Market Reforms in Bangladesh," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 123758, International Association of Agricultural Economists.

    More about this item

    Keywords

    Trade liberalization; Poverty; Bangladesh; Computable General Equilibrium (CGE) Model;

    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

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