Fiscal Policies and Increased Trade Openness: Poverty Impacts in Ecuador
This research quantifies the effects on poverty in Ecuador of bilateral trade liberalization with the U.S. and fiscal changes (value added tax and direct taxes) which seek to compensate tariff revenue losses, so that the government deficit remains constant. This is a very important issue for Ecuador because it adopted the U.S. dollar as its currency in 2000, forgoting the use of monetary and exchange rate policy instruments. This paper highlights labor market effects and fiscal policies as the main mechanisms through which trade impacts poverty. The paper combines a reduced-form micro household income and occupational choice model (using the 2005/6 Ecuadorian household survey) with a standard single-country computable general equilibrium model (employing a 2004 Social Accounting Matrix). A sequential approach that simulates the full income and distributional impact of trade and tax policies is followed. The impact of these policy changes on the economy is small. Indigence and income distribution effects are small but positive. There are mixed results on poverty. The best poverty reduction outcomes are attained when only direct taxes are used for making up tariff revenue losses and the worst when a flat VAT rate is employed, including the elimination of current VAT exemptions (mostly for agricultural goods). A key contribution of this research is to illustrate the significance for poverty of policy choices available to the government.
|Date of creation:||2008|
|Contact details of provider:|| Postal: Pavillon J.A. De Seve, Québec, Québec, G1V 0A6|
Phone: 1-418-656-2131, ext. 2697
Web page: http://www.pep-net.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dollar, David & Kraay, Aart, 2002.
"Growth Is Good for the Poor,"
Journal of Economic Growth,
Springer, vol. 7(3), pages 195-225, September.
- Dollar, David & Kraay, Aart, 2001. "Growth is good for the poor," Policy Research Working Paper Series 2587, The World Bank.
- L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, vol. 42(1), pages 72-115, March.
- Jaime de MELO & Sherman ROBINSON, 2015. "Product Differentiation And The Treatment Of Foreign Trade In Computable General Equilibrium Models Of Small Economies," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 2, pages 21-41 World Scientific Publishing Co. Pte. Ltd..
- de Melo, Jaime & Robinson, Sherman, 1989. "Product differentiation and the treatment of foreign trade in computable general equilibrium models of small economies," Journal of International Economics, Elsevier, vol. 27(1-2), pages 47-67, August.
- Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-1072, June.
- Ravallion, Martin, 2001. "Growth, Inequality and Poverty: Looking Beyond Averages," World Development, Elsevier, vol. 29(11), pages 1803-1815, November.
- Ravallion, Martin, 2001. "Growth, inequality, and poverty : looking beyond averages," Policy Research Working Paper Series 2558, The World Bank.
- Luc Savard, 2003. "Poverty and Income Distribution in a CGE-Household Micro-Simulation Model: Top-Down/Bottom Up Approach," Cahiers de recherche 0343, CIRPEE.
- François Bourguignon & Anne-Sophie Robilliard & Sherman Robinson, 2003. "Representative versus real households in the macro-economic modeling of inequality," Working Papers DT/2003/10, DIAL (Développement, Institutions et Mondialisation).
- François Bourguignon & Anne-Sophie Robilliard & Sherman Robinson, 2003. "Representative versus real households in the macro-economic modeling of inequality," DELTA Working Papers 2003-05, DELTA (Ecole normale supérieure).
- Fields, Gary S, 1989. "Changes in Poverty and Inequality in Developing Countries," World Bank Research Observer, World Bank Group, vol. 4(2), pages 167-185, July.
- Angus Deaton & Salman Zaidi, 2002. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," World Bank Publications, The World Bank, number 14101, May.
- Deaton, A. & Zaidi, S., 1999. "Guidelines for Constructing Consumption Aggregates for Welfare Analysis," Papers 192, Princeton, Woodrow Wilson School - Development Studies.
- Angus Deaton & Salman Zaidi, 1999. "Guidelines for Constructing Consumption Aggregates For Welfare Analysis," Working Papers 217, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
- Dolado, Juan J & Jenkinson, Tim & Sosvilla-Rivero, Simon, 1990. " Cointegration and Unit Roots," Journal of Economic Surveys, Wiley Blackwell, vol. 4(3), pages 249-273.
- Davies, James B., 2004. "Microsimulation, CGE and Macro Modelling for Transition and Developing Economies," WIDER Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
- Robilliard, Anne-Sophie & Robinson, Sherman, 2005. "The social impact of a WTO agreement in Indonesia," Policy Research Working Paper Series 3747, The World Bank.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- repec:dau:papers:123456789/5130 is not listed on IDEAS
- Donnelly, William A. & Johnson, Kyle & Tsigas, Marinos E. & Ingersoll, David, 2004. "Revised Armington Elasticities of Substitution for the USITC Model and the Concordance for Constructing a Consistent Set for the GTAP Model," Working Papers 15861, United States International Trade Commission, Office of Economics.
- L. Alan Winters, 2002. "Trade Liberalisation and Poverty: What are the Links?," The World Economy, Wiley Blackwell, vol. 25(9), pages 1339-1367, 09.
- Tourinho, Octávio Augusto Fontes & Kume, Honorio & Pedroso, Ana Cristina, 2007. "Elasticidades de Armington para o Brasil: 1986-2002," Revista Brasileira de Economia, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 61(2), August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:lvl:mpiacr:2008-19. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Manuel Paradis)
If references are entirely missing, you can add them using this form.