Impacts of trade liberalization on growth and poverty in Ethiopia: a dynamic computable general equilibrium Model

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This paper presents a dynamic computable general equilibrium (CGE) Model for Ethiopia's trade liberalization that allows for quantification of income and welfare effects stemming from tariff reduction. This dynamic model has been built using a Social Accounting Matrix (SAM) of 1999/2000 for Ethiopia. The model is simulated for altemative policies scenarios depicting full and indiscriminating liberalization, full and discriminating liberalization, gradual and rationalized liberalization and instantaneous tariff liberalization. The main findings of these scenarios are a decline in poverty among all households in the long run. In the short run, poverty remains significantly unaffected for most of the simulations' Scenarios. The simulations' results show that static version of the model underestimates trade liberalization's impacts on production, and welfare, since it excludes the accumulation effects. However, from the altemative simulations' scenarios, instantaneous type of liberalization seems performing well in its capacity to increase real GDP, welfare, real output, and real export in the long run. This liberalization also recorded substantial decline in poverty level in the long run.



Computable General Equilibrium, Growth and poverty in Ethiopia