Impacts of Trade Liberalization on Growth and Poverty in Ethiopia: A Dynamic Computable General Equilibrium Model
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Date
2007-07
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Addis Ababa University
Abstract
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 alternative 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 alternative 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.
Key words: Dynamic CGE Model, Trade Liberalization, Poverty, Growth,
Ethiopia
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Keywords
Dynamic CGE Model, Trade Liberalization, Poverty, Growth, Ethiopia