Do the Poor benefit from Regional Trade Pacts? An Illustration from the Central America Free Trade Agreement in Nicaragua

Maurizio Bussolo and Yoko Niimi

No 331331, Conference papers from Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project

Abstract: This paper main objective is providing an ex-ante assessment of the poverty and income distribution impacts of a Central America Free Trade Area agreement for Nicaragua. A general equilibrium macro model is used to simulate trade reform scenarios and to estimate their price effects, and a micro-module maps these price changes into variations of real incomes at the individual household level. A useful insight from this analysis is that even if the final total impact on poverty is not too large, its dispersion across households – due to their heterogeneity in terms of factor endowments, inputs use, commodity production, and consumption preferences – is significant and this should be taken into account when designing compensatory policies. Additionally a growth and redistribution decomposition shows that, at least in the short to medium run, redistribution can be as important as growth. A main policy advice emerges: to boost trade-induced poverty reductions, Nicaragua should consider enlarging its own liberalization to countries other than the US.

Keywords: International Relations/Trade; Food Security and Poverty (search for similar items in EconPapers)
Pages: 48
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:ags:pugtwp:331331

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