Trade Liberalization and Poverty: A Macro-Micro Analysis in Ethiopia
Using a CGE model, this study analyses the impact of trade liberalization on poverty at the household level taking Ethiopia as a case. Two scenarios (complete tariff cut and uniform tariff scheme) suggest that further liberalization of trade has little short-run effect on the overall economy. However, the agriculture-based manufacturing sector (in particular, textile and leather) is likely to be strongly affected by further tariff reduction. Reductions in import prices of textiles and leather products increase imports of these goods implying that trade liberalization is likely to dampen domestic production of textile and leather products. Poverty shows a slight increase in both scenarios. At the national level, a complete tariff cut results in an increase in poverty by 2.8 percent, while a uniform tariff scheme raises poverty by 2.3 percent. Similarly, it is found that poverty gap and poverty severity indices show a slight increase. Comparing the effect of trade reform on different household groups, i.e. farm households, wage earner households and entrepreneur households, poverty in entrepreneur households increases by a higher percentage change (3.2 percent) in the complete tariff cut scenario. Poverty incidence increases by 1.7 and 1.5 percent for farm households and wage earners, respectively, under the complete tariff cut scenario. This comparison holds consistently when looking at the more realistic uniform tariff scheme. Entrepreneur households are at a disadvantage due to trade liberalization shown in the poverty gap and poverty severity indices. This is consistent with the theoretical argument that previously protected infant industries are highly affected by trade liberalization.
|Date of creation:||2011|
|Contact details of provider:|| Web page: http://www.ael.ethz.ch/|
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.:
- Margaret Chitiga & Tonia Kandiero & Ramos Mabugu, 2005.
"Computable General Equilibrium Micro-Simulation Analysis of the Impact of Trade Policies on Poverty in Zimbabwe,"
Working Papers MPIA
- Margaret Chitiga & Ramos Mabugu & Tonia Kandiero, 2007. "A Computable General Equilibrium Micro-Simulation Analysis of the Impact of Trade Policies on Poverty in Zimbabwe," Working Papers 200715, University of Pretoria, Department of Economics.
- Thomas W. Hertel & Jeffrey J. Reimer, 2006. "Predicting the Poverty Impacts of Trade Reform," QA - Rivista dell'Associazione Rossi-Doria, Associazione Rossi Doria, issue 2, May.
- Thomas Hertel & Jeffrey Reimer, 2005. "Predicting the poverty impacts of trade reform," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 377-405.
- Hertel, Thomas W. & Reimer, Jeffrey J., 2004. "Predicting the poverty impacts of trade reform," Policy Research Working Paper Series 3444, The World Bank.
- Elena Ianchovichina & Alessandro Nicita & Isidro Soloaga, 2002. "Trade Reform and Poverty: The Case of Mexico," The World Economy, Wiley Blackwell, vol. 25(7), pages 945-972, 07.
- Ianchovichina, Elena & Nicita, Alessandro & Soloaga, Isidro, 2001. "Trade reform and household welfare : the case of Mexico," Policy Research Working Paper Series 2667, The World Bank.
- John Cockburn, 2002. "Trade Liberalisation and Poverty in Nepal: A Computable General Equilibrium Micro Simulation Analysis," CSAE Working Paper Series 2002-11, Centre for the Study of African Economies, University of Oxford.
- John Cockburn, 2004. "Trade Liberalisation and Poverty in Nepal A Computable General Equilibrium Micro Simulation Analysis," Development and Comp Systems 0409012, EconWPA.
- Michael Carter & Peter Little & Tewodaj Mogues & Workneh Negatu, 2005. "Shocks, Sensitivity and Resilience: Tracking the Economic Impacts of Environmental Disaster on Assets in Ethiopia and Honduras," Development and Comp Systems 0511029, EconWPA.
- Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2005. "Shocks, Sensitivity and Resilience: Tracking the Economic Impacts of Environmental Disaster on Assets in Ethiopia and Honduras," Staff Paper Series 489, University of Wisconsin, Agricultural and Applied Economics.
- Carter, Michael R. & Little, Peter D. & Mogues, Tewodaj & Negatu, Workneh, 2006. "Shocks, sensitivity and resilience: tracking the economic impacts of environmental disaster on assets in Ethiopia and Honduras," DSGD discussion papers 32, International Food Policy Research Institute (IFPRI).
- Bigsten, Arne & Kebede, Bereket & Shimeles, Abebe & Taddesse, Mekonnen, 2003. "Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys," World Development, Elsevier, vol. 31(1), pages 87-106, January.
- Bigsten, Arne & Kebede, Bereket & Shimeles, Abebe & Taddesse , Mekonnen, 2002. "Growth and Poverty Reduction in Ethiopia: Evidence from Household Panel Surveys," Working Papers in Economics 65, University of Gothenburg, Department of Economics.
- Caesar B. Cororaton & Erwin L. Corong, 2006. "Agriculture-sector Policies and Poverty in the Philippines: a Computable General-Equilibrium (CGE) Analysis," Working Papers MPIA 2006-09, PEP-MPIA.
- Neri Salvadori, 2004. "Economic growth and distribution: on the nature and causes of the wealth of nations," Economics Bulletin, AccessEcon, vol. 28(18), pages 1.
- BUSSOLO Maurizio & LAY Jann, "undated". "Globalization and Poverty Changes in Colombia," EcoMod2003 330700029, EcoMod.
- Maurizio Bussolo & Jann Lay, 2003. "Globalisation and Poverty Changes in Colombia," OECD Development Centre Working Papers 226, OECD Publishing.
- Andrew Berg & Anne O. Krueger, 2003. "Trade, Growth, and Poverty; A Selective Survey," IMF Working Papers 03/30, International Monetary Fund.
- Aassve, Arnstein & Engelhardt, Henriette & Francavilla, Francesca & Kedir, Abbi & Kim, Jungho & Mealli, Fabrizia & Mencarini, Letizia & Pudney, Stephen & Prskawetz, Alexia, 2005. "Poverty and fertility in less developed countries: a comparative analysis," ISER Working Paper Series 2005-13, Institute for Social and Economic Research.
- Arnstein Aassve & Henriette Engelhardt & Francesca Francavilla & Abbi Kedir & Jungho Kim & Fabrizia Mealli & Letizia Mencarini & Stephen Pudney & Alexia Prskawetz, 2005. "Poverty and Fertility in Less Developed Countries: A Comparative Analysis," Discussion Papers in Economics 05/28, Department of Economics, University of Leicester.
- repec:ebl:ecbull:v:28:y:2004:i:18:p:a0 is not listed on IDEAS
- Nabil Annabi & John Cockburn & Bernard Decaluwé, 2006. "Functional Forms and Parametrization of CGE Models," Working Papers MPIA 2006-04, PEP-MPIA.
- Chen, Maggie Xiaoyang & Otsuki, Tsunehiro & Wilson, John S., 2006. "Do standards matter for export success ?," Policy Research Working Paper Series 3809, The World Bank.
- Ravallion, Martin & Lokshin, Michael, 2004. "Gainers and losers from trade reform in Morocco," Policy Research Working Paper Series 3368, The World Bank.
- Manson Nwafor & Adeola Adenikinju & Kanayo Ogujiuba, 2007. "The Impacts of Trade Liberalization on Poverty in Nigeria: Dynamic Simulations in a CGE Model," Working Papers MPIA 2007-16, PEP-MPIA.
- Gelan, Ayele, 2002. "Trade liberalisation and urban-rural linkages: a CGE analysis for Ethiopia," Journal of Policy Modeling, Elsevier, vol. 24(7-8), pages 707-738, November.
- Rizwana Siddiqui, 2007. "Modelling Gender Dimensions of the Impact of Economic Reforms in Pakistan," Working Papers MPIA 2007-13, PEP-MPIA.
- Ramos Mabugu & Margaret Chitiga, 2007. "Poverty and Inequality Impacts of Trade Policy Reforms in South Africa," Working Papers MPIA 2007-19, PEP-MPIA.
- Nabil Annabi & Fatou Cissé & John Cockburn & Bernard Decaluwé, 2005. "Trade Liberalisation, Growth and Poverty in Senegal: a Dynamic Microsimulation CGE Model Analysis," Working Papers 2005-07, CEPII research center.
- Nabil Annabi & Fatou Cissé & John Cockburn & Bernard Decaluwé, 2005. "Trade Liberalisation, Growth and Poverty in Senegal: a Dynamic Microsimulation CGE Model Analysis," Cahiers de recherche 0512, CIRPEE.
When requesting a correction, please mention this item's handle: RePEc:zbw:gdec11:44. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.