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Simulating the poverty impact of macroeconomic shocks and policies

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  • Essama-Nssah, B.

Abstract

Developing countries face a host of macroeconomic challenges in the design and implementation of development strategies and policies. The importance of the underlying poverty and distributional issues creates a need for relevant and reliable ways of tracking the social impact of shocks and policies. This paper describes and demonstrates the use of a stylized framework for simulating the poverty implications of the Dutch disease, a change in the terms of trade and budgetary policy. The basic approach is to embed a Lorenz model of the size distribution of economic welfare in a general equilibrium model of an open economy. It is observed that, while aggregate welfare and poverty effects may be negligible, the structural and distributional impacts tend to be significant. The latter drive the political economy of policymaking and point to the need for an analytical framework that accounts for both the structural richness of the economy and the heterogeneity of the stakeholders

Suggested Citation

  • Essama-Nssah, B., 2005. "Simulating the poverty impact of macroeconomic shocks and policies," Policy Research Working Paper Series 3788, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3788
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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. 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.
    3. Sherman Robinson & Hans Lofgren, 2005. "Macro Models and Poverty Analysis: Theoretical Tensions and Empirical Practice," Development Policy Review, Overseas Development Institute, vol. 23(3), pages 267-283, May.
    4. Ravallion, Martin & Lokshin, Michael, 2004. "Gainers and losers from trade reform in Morocco," Policy Research Working Paper Series 3368, The World Bank.
    5. Devaragan, Shantayanan & Lewis, Jeffrey D. & Robinson, Sherman, 1990. "Policy lessons from trade-focused, two-sector models," Journal of Policy Modeling, Elsevier, vol. 12(4), pages 625-657.
    6. Richard N. Cooper, 1992. "Economic Stabilization and Debt in Developing Countries," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031876, January.
    7. Datt, Gaurav, 1998. "Computational tools for poverty measurement and analysis," FCND discussion papers 50, International Food Policy Research Institute (IFPRI).
    8. Essama-Nssah, 2004. "Building and running general equilibrium models in EViews," Policy Research Working Paper Series 3197, The World Bank.
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    Citations

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    Cited by:

    1. Delfin S. Go & John Page, 2008. "Africa at a Turning Point? : Growth, Aid, and External Shocks," World Bank Publications, The World Bank, number 6421, January.
    2. Nkang, Nkang & Omonona, Bolarin & Yusuf, Suleiman & Oni, Omobowale, 2012. "Simulating the Impact of Exogenous Food Price Shock on Agriculture and the Poor in Nigeria: Results from a Computable General Equilibrium Model," Sustainable Agriculture Research, Canadian Center of Science and Education, vol. 1(2).
    3. Shahidur R. Khandker & Gayatri B. Koolwal & Hussain A. Samad, 2010. "Handbook on Impact Evaluation : Quantitative Methods and Practices," World Bank Publications, The World Bank, number 2693, January.

    More about this item

    Keywords

    Economic Theory&Research; Achieving Shared Growth; Inequality; Rural Poverty Reduction; Consumption;

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