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Poverty impacts of increased openness and fiscal policies in a dollarized economy: a CGE-micro approach for Ecuador

Sara Wong (), Ricardo Arguello () and Ketty Rivera

Documentos de Trabajo from Universidad del Rosario

Abstract: We quantify the effects on poverty and income distribution in Ecuador of bilateral tradeliberalization with the US and a budget-neutral value added tax increase which seeks to compensatetariff revenue losses. We stress the study of fiscal policies that the government couldtap in order to compensate for tariff revenue loss. This is a very important issue for Ecuadorbecause this country adopted the US dollar as its currency in 2000, forgiving the use of importantpolicy instruments. To study these issues we combine a reduced-form micro householdincome and occupational choice model (using 2005/6 data from the Ecuadorian LSMS) with astandard single-country computable general equilibrium model (employing a 2004 SAM). Wefollow a sequential approach that simulates the full distributional impact of trade and tax policies.We find that the impact of these policy changes on extreme poverty and income distributionis small but positive.

JEL-codes: E62 F15 I32 O24 O54 (search for similar items in EconPapers)
Pages: 50
Date: 2007-11-25
New Economics Papers: this item is included in nep-cmp and nep-int
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