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Tariff Reduction, Fiscal Adjustment and Poverty in Pakistan: a CGE-Based Analysis

Author

Listed:
  • Rizwana Siddiqui
  • Abdul Razzaq Kemal
  • Rehana Siddiqui
  • Ali Kemal

Abstract

After more than four decades of protective trade policy, Pakistan undertook substantial trade liberalization beginning in the 1990s. We assess the short- and long-run impacts of trade liberalization (full and partial) on household incomes, welfare, and poverty under various fiscal scenarios. A computable general equilibrium (CGE) model of the Pakistan economy for the year 1990 is used with 10 household categories (identified by employment status in urban areas and by land holdings in rural areas), 12 production activities, and two factors of production. Our general conclusion is that trade reform improves the average welfare of urban households but reduces the welfare of rural households. In both regions, the rich generally benefit, whereas the poor lose out. The fall in urban poverty dominates the increase in rural poverty such that overall poverty is reduced.

Suggested Citation

  • Rizwana Siddiqui & Abdul Razzaq Kemal & Rehana Siddiqui & Ali Kemal, 2008. "Tariff Reduction, Fiscal Adjustment and Poverty in Pakistan: a CGE-Based Analysis," Working Papers MPIA 2008-17, PEP-MPIA.
  • Handle: RePEc:lvl:mpiacr:2008-17
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    File URL: https://portal.pep-net.org/documents/download/id/12273
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    References listed on IDEAS

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    1. Rizwana Siddiqui & Zafar Iqbal, 1999. "Social Accounting Matrix of Pakistan for 1989-90," PIDE-Working Papers 1999:171, Pakistan Institute of Development Economics.
    2. Moore, Mick & Leavy, Jennifer & Houtzager, Peter & White, Howard, 1999. "Polity qualities: how governance affects poverty," MPRA Paper 9467, University Library of Munich, Germany.
    3. Rizwana Siddiqui & A. R. Kemal, 2006. "Remittances, Trade Liberalisation, and Poverty in Pakistan: The Role of Excluded Variables in Poverty Change Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 45(3), pages 383-415.
    4. A.R. Kemal & Rehana Siddiqui & Rizwana Siddiqui, 2001. "Triff Reduction and Income Destribution A CGE-based Analysis for Urban and Rural Households in Pakistan," PIDE-Working Papers 2001:181, Pakistan Institute of Development Economics.
    5. Dorosh, Paul & Niazi, Muhammad Khan, 2006. "Social Accounting Matrix for Pakistan, 2001-02: Methodology and Results," MPRA Paper 2242, University Library of Munich, Germany.
    6. A. R. Kemal, 1981. "Substitution Elasticities in the Large- Scale Manufacturing Industries of Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 20(1), pages 1-36.
    7. 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.
    8. Rehana Siddiqui & Rizwana Siddiqui & Zafar Iqbal, 1999. "The Impact of Tariff Reforms on Income Distribution in Pakistan: A CGE-based Analysis," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 38(4), pages 789-804.
    9. Rashid Amjad & A.R. Kemal, 1997. "Macroeconomic Policies and their Impact on Poverty Alleviation in Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 36(1), pages 39-68.
    10. Thorbecke, Erik, 1991. "Adjustment, growth and income distribution in Indonesia," World Development, Elsevier, vol. 19(11), pages 1595-1614, November.
    11. Siddiqui, Rizwana & Iqbal, Zafar, 1999. "TARIFF REDUCTION AND FUNCTIONAL INCOME DISTRIBUTION IN PAKISTAN: A CGE Analysis," MPRA Paper 6141, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Abdoulaye Diagne & François Joseph Cabral & Fatou Cisse & Mamadou Dansokho & Samba Ba, 2007. "Politiques commerciales, intégration régionale, pauvreté et distribution de revenus au Sénégal/Trade Policies, Regional Integration, Poverty and Income Distribution in Senegal," Working Papers MPIA 2007-15, PEP-MPIA.
    2. Rizwana Siddiqui, 2004. "Modelling Gender Dimensions of the Impact of Economic Reforms on Time Allocation among Market Work,Household Work, and Leisure," PIDE-Working Papers 2004:185, Pakistan Institute of Development Economics.
    3. Obeng, Camara Kwasi, 2014. "Impact of import liberalisation on poverty: a dynamic computable general equilibrium and microsimulation analysis for Ghana," MPRA Paper 58182, University Library of Munich, Germany.

    More about this item

    Keywords

    Trade policy; fiscal adjustment; welfare and poverty; CGE;

    JEL classification:

    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • I3 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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