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Implications of WTO agreements and unilateral trade policy reforms for poverty in Bangladesh : short versus long-run impacts

Author

Listed:
  • Annabi, Nabil
  • Khondker, Bazlul
  • Raihan, Selim
  • Cockburn, John
  • Decaluwe, Bernard

Abstract

The authors examine the effects of WTO agreements and domestic trade policy reforms on production, welfare, and poverty in Bangladesh. They use a sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, allowing for long-run analysis. The study is based on the 2000 Social Accounting Matrix (SAM) of Bangladesh including 15 production sectors, four factors of production (skilled and unskilled labor, agricultural and nonagricultural capital), and nine household groups (five in rural areas and four in urban areas). To examine the link between the macroeconomic effects and microeconomic effects in terms of poverty, the authors use the representative household approach with actual intra-group income distributions. The study presents five simulations for which the major findings are: (1) The Doha scenario has negative implications for the overall macroeconomy, household welfare, and poverty in Bangladesh. Terms of trade deteriorate and consumer prices, particularly food prices, increase more than nominal incomes, especially among poor households. (2) Free world trade has similar, but larger, impacts. (3) Domestic trade liberalization induces an expansion of agricultural and light manufacturing sectors, favorable changes in the domestic terms of trade. Although the short-run welfare and poverty impacts are negative, these turn positive in the long run when capital has adjusted through new investments. Rising unskilled wage rates make the poorest households the biggest winners in terms of welfare and poverty reduction. (4) Domestic liberalization effects far outweigh those of free world trade when these scenarios are combined. (5) Remittances constitute a powerful poverty-reducing tool given their greater importance in the income of the poor.

Suggested Citation

  • Annabi, Nabil & Khondker, Bazlul & Raihan, Selim & Cockburn, John & Decaluwe, Bernard, 2006. "Implications of WTO agreements and unilateral trade policy reforms for poverty in Bangladesh : short versus long-run impacts," Policy Research Working Paper Series 3976, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3976
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    Citations

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    Cited by:

    1. John Gilbert, 2008. "Agricultural Trade Reform and Poverty in the Asia-Pacific: A Survey and Some New Results," Working Papers 2008-01, Utah State University, Department of Economics, revised 19 Dec 2008.
    2. John Gilbert, 2008. "Trade Policy, Poverty, and Income Distribution in CGE Models: An Application to SAFTA," Working Papers 2008-02, Utah State University, Department of Economics, revised 19 Dec 2008.
    3. John Gilbert & Nilanjan Banik, 2012. "Socio-economic impacts of regional transport infrastructure in South Asia," Chapters,in: Infrastructure for Asian Connectivity, chapter 5, pages 139-163 Edward Elgar Publishing.
    4. Obi-Egbedi, Ogheneruemu & Okoruwa, Victor O. & Yusuf, Sulaiman A. & Adenegan, Kemisola O. & Alarudeen, Aminu, 2013. "Rice Trade Protectionism Versus Liberalization in Nigeria: A CGE Analysis of Economic and Welfare Effects," 2013 AAAE Fourth International Conference, September 22-25, 2013, Hammamet, Tunisia 161528, African Association of Agricultural Economists (AAAE).
    5. John Gilbert & Nilanjan Banik, 2010. "Socioeconomic Impacts of Cross- Border Transport Infrastructure Development in South Asia," Development Economics Working Papers 21803, East Asian Bureau of Economic Research.
    6. Sayeed, Yeasmin, 2014. "Trade-offs in Achieving Human Development Goals for Bangladesh," Working Papers 2014:6, Örebro University, School of Business.
    7. repec:gam:jsusta:v:9:y:2017:i:4:p:612-:d:95875 is not listed on IDEAS
    8. Kenneth Reinert, 2007. "The European Union, the Doha Round, and Asia," Asia Europe Journal, Springer, vol. 5(3), pages 317-330, September.
    9. Acharya, Sanjaya & Hölscher, Jens & Perugini, Cristiano, 2012. "Trade liberalisation and inequalities in Nepal: A CGE analysis," Economic Modelling, Elsevier, vol. 29(6), pages 2543-2557.

    More about this item

    Keywords

    Economic Theory&Research; Rural Poverty Reduction; Free Trade; Markets and Market Access;

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