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GTAP Resource #3386

"Are the Poverty Effects of Trade Policies Invisible?"
by Verma, Monika, Thomas Hertel and Ernesto Valenzuela

Beginning with the WTO’s Doha Development Agenda and establishment of the
Millennium Development Goal of reducing poverty by 50 percent by 2015, poverty
impacts of trade reforms have become central to the global development agenda. This has been particularly true of agricultural trade reforms due to the importance of grains in the diets of the poor, presence of relatively higher protection in agriculture, as well as heavy concentration of global poverty in rural areas where agriculture is the main source of income. Yet some in this debate have argued that, given the extreme volatility in
agricultural commodity markets, the additional price and therefore poverty impacts due to
trade liberalization might well be indiscernible. This paper formally tests the “invisibility
hypothesis” using the method of stochastic simulation in a trade-poverty modeling
framework. The hypothesis test is based on the comparison of two samples of price and
poverty distributions. The first originates solely from the inherent variability in global
staple grains markets, while the second combines the effects of inherent market
variability with those of trade reform in these same markets. Results, at the national and
stratum level indicate that the short-run poverty impacts of full trade liberalization in
staple grains trade worldwide, are distinguishable in only four of the fifteen countries,
suggesting that impacts of more modest agricultural trade reforms are indeed likely to be
invisible in short run.. Countries that show statistically significant short run impacts are
the ones characterized by high staple grains tariffs and/or a moderate degree of grain
markets variability. Within each country, results are heterogeneous. In two thirds of the
sample countries, agriculturally self-employed poor experience statistically significant
poverty impacts from trade liberalization. However, this figure is under a third for all the
other strata.

Resource Details (Export Citation) GTAP Keywords
Category: 2010 Conference paper
Status: Published
By/In: Presented at the 13th Annual Conference on Global Economic Analysis, Penang, Malaysia
Date: 2011
Version: revised version
Created: Verma, M. (4/15/2010)
Updated: Verma, M. (4/5/2011)
Visits: 3,860
No keywords have been specified.

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