nep-cmp New Economics Papers
on Computational Economics
Issue of 2006‒12‒22
one paper chosen by
Stan Miles
Thompson Rivers University

  1. Does Trade Liberalisation Lead to Poverty Alleviation? a CGE Microsimulation Approach for Zimbabwe By Margaret Chitiga; Ramos Mabugu

  1. By: Margaret Chitiga; Ramos Mabugu
    Abstract: A CGE microsimulation model is used to study the poverty impacts of trade liberalization in Zimbabwe. A sample of 14006 households from a 1995 household survey is individually modeled in a CGE framework. The experiment performed is a 50 percent reduction in all import tariffs. The sectors with the highest initial tariffs are the non-export agriculture sectors and the most export-intensive sectors are found in agriculture and in mining. The halving of tariffs favors export-oriented sectors, mainly in agriculture, whereas industrial sectors are hardest hit by the increased import competition. As agriculture is intensive in unskilled labor and industry is intensive in skilled labor, unskilled wages rise relative to skilled wages. The consumer prices fall and this, together with increased unskilled wages, leads to a fall in poverty. The fall in the price of manufactured food, which is consumed mainly in urban areas, coupled with the large number of unskilled workers in these urban areas, explains why poverty falls more here than in rural Zimbabwe.
    Keywords: Computable General Equilibrium, Trade Liberalisation, Microsimulation, Poverty
    JEL: C68 D31 D58 I32
    Date: 2006
    URL: http://d.repec.org/n?u=RePEc:lvl:mpiacr:2006-18&r=cmp

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