Impact of Trade Liberalization on Poverty in Ethiopia: A Computable General Equilibrium Microsimulation

Sindu Kebede, Belay Fekadu () and Dejene Aredo ()
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Dejene Aredo: Addis Ababa University P.O.Box 5563, Addis Ababa, Ethiopia

International Journal of Microsimulation, 2016, vol. 9, issue 1, 109-133

Abstract: This study analyses the impact of trade liberalization on poverty in Ethiopia using a computable general equilibrium Microsimulation approach. Two scenarios (complete tariff cut and uniform tariff scheme) suggest that further liberalization of trade has a negative short-run effect on the overall economy. We find that the agriculture-based manufacturing sector (in particular, textile and leather) is likely to be strongly affected by tariff reductions. Poverty estimates show an increase in both scenarios. At the national level, complete tariff cut increases poverty by 2.8%, compared to 2.3% under a uniform tariff scheme. In both scenarios, poverty increases more among entrepreneur households (3.2% in the uniform tariff cut scenario), than farm and wage earner households (0.9% and 1.5%, respectively). This is consistent with the theoretical argument that previously-protected infant industries are highly affected by trade liberalization and may require compensatory policies.

Keywords: trade liberalization; poverty; CGE; Microsimulation (search for similar items in EconPapers)
JEL-codes: D58 O24 O55 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ijm:journl:v:9:y:2016:i:1:p:109-133

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