Agricultural Trade Liberalisation and Poverty in Tunisia: Micro-Simulation in a General Equilibrium Framework

Résumé


The study tries to answer the following questions: Will exposure to world agricultural prices generate more poverty or less? To what extent will households be affected by changes in agricultural trade polices? Do multilateral agricultural liberalization matter more than bilateral changes? Results of simulations using a computable general equilibrium (CGE) model linked to household survey data suggest that trade liberalization has only modest effects on the level of GDP, but it has a substantial effect in reducing poverty. Moreover, the combined effects of global and domestic liberalization are more pro-poor than the effect of domestic liberalization alone. [PUB ABSTRACT]

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Agricultural Trade Liberalisation and Poverty in Tunisia: Micro-Simulation in a General Equilibrium Framework

1 Introduction

Determining the patterns and trends in poverty is central in policymaking in developing countries. Trade policies and external shocks are also seen as a way of tackling poverty given their impact on stakeholders through various transmission channels: employment, prices, assets, and transfers. Accordingly, and addition to their effects on sectoral demand for labor, particularly in those sectors that employ the poor, the manner in which trade liberalisation affects prices will have an important bearing on income and expenditures and, directly or indirectly, on welfare measures. Thus, trade policies affect poverty through their effect on economic growth on one hand as well as through their distributional effects on the other.

Tunisia is about to start implementing a new agreement on trade in agricultural products with the European Union (EU) under the association agreement signed in 1995, simultaneous to its participation to the multilateral negotiation on agricultural trade under the Doha Development Agenda (DDA). The aggregate impact of trade liberalisation is likely to be positive, but like other major changes in economic policy, agricultural trade liberalisation, may have some negative effects. Given that Tunisia's agricultural sector currently enjoys substantial protection, additional broad-based trade liberalisation will likely have a detrimental impact on some classes of households, including the bulk of the poor population. Two major questions rise: How will the Tunisian economy be affected by the new expected agreements on agricultural trade liberalisation, both at the bilateral and multilateral levels? How will households react to these macro changes? Accounting for the effects of trade policy reform and external shocks on the distribution of welfare among individuals and households has long been on the agenda of economists. However, doing it satisfactorily has proved difficult, though progress in economic analysis and the increasing avai...

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