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Does Trade Liberalisation Lead to Poverty Alleviation? a CGE Microsimulation Approach for Zimbabwe

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  • Margaret Chitiga
  • Ramos Mabugu

Abstract

A CGE microsimulation model is used to study the poverty impacts of trade liberalization in Zimbabwe. A sample of 14006 households from a 1995 household survey is individually modeled in a CGE framework. The experiment performed is a 50 percent reduction in all import tariffs. The sectors with the highest initial tariffs are the non-export agriculture sectors and the most export-intensive sectors are found in agriculture and in mining. The halving of tariffs favors export-oriented sectors, mainly in agriculture, whereas industrial sectors are hardest hit by the increased import competition. As agriculture is intensive in unskilled labor and industry is intensive in skilled labor, unskilled wages rise relative to skilled wages. The consumer prices fall and this, together with increased unskilled wages, leads to a fall in poverty. The fall in the price of manufactured food, which is consumed mainly in urban areas, coupled with the large number of unskilled workers in these urban areas, explains why poverty falls more here than in rural Zimbabwe.

Suggested Citation

  • Margaret Chitiga & Ramos Mabugu, 2006. "Does Trade Liberalisation Lead to Poverty Alleviation? a CGE Microsimulation Approach for Zimbabwe," Working Papers MPIA 2006-18, PEP-MPIA.
  • Handle: RePEc:lvl:mpiacr:2006-18
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    File URL: https://portal.pep-net.org/documents/download/id/13534
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    References listed on IDEAS

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    Cited by:

    1. Lindsay Shutes & Marijke Kuiper, 2015. "Expanding the household coverage of global simulation models: an application to Ghana," FOODSECURE Technical papers 3, LEI Wageningen UR.
    2. 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.

    More about this item

    Keywords

    Computable General Equilibrium; Trade Liberalisation; Microsimulation; Poverty;

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty

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