The Impact of Trade Liberalization on Household Welfare in Vietnam

Nguyen Chan and Tran Kim Dung

Working Papers MPIA from PEP-MPIA

Abstract: This paper evaluates the efficiency and distributional effects of trade liberalization in the context of fiscal reform in Vietnam. The analysis is performed using a computable general equilibrium (CGE) model of the Vietnamese economy calibrated to late- 1990s production and household data. It is a standard small open price taking economy model with CES nested demand and CES production functions. Results show that the efficiency gains (in term of aggregate welfare measure) from the combined tax and tariff reform are modest, but significant redistribution occurs among rich and poor household groups and between urban and rural populations. Careful analyses show that the sharpness of the redistribution falls as the country moves from only trade liberalization the combined tax and tariff reforms. Finally, additional simulations have been performed to make clearer the transmission mechanisms linking tariff policy to income distribution and household welfare. A key finding is that trade liberalization is pro-rich due essentially to the higher share of imported goods consumed by the rich.

Keywords: CGE model; counterfactual simulations; distributional effects; efficiency; household welfare; tariff; tax reform; trade liberalization; VAT; Vietnam (search for similar items in EconPapers)
JEL-codes: C68 D58 D63 R13 R20 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-cmp, nep-dev, nep-int and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:lvl:mpiacr:2006-02

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