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GTAP Resources: Resource Display

GTAP Resource #6105

"Considering the Interplay between Financing and Transfer Mechanisms of Poverty Eradication Policies"
by Boysen, Ole

In many parts of Sub-Saharan Africa, achieving SDG 1, i.e. eradication of extreme poverty by 2030, will require large policy interventions. Although ultimately economic development is the process necessary to lift all people out of poverty, this will neither happen fast enough nor guarantee to benefit the poor to a sufficient extent to reach SDG 1 by 2030. Consequently, it requires complementary policies that directly support the poor and that need to be financed through additional resources by borrowing, taxation, or aid.

CGE studies have analysed the impacts of shocks, such as foreign aid inflows or changes in tax rates, on the economy and incomes and, used in combination with microsimulation models, also those on poverty. However, raising the large funds required for poverty eradication in least developed countries invariably has feedback effects on the objective itself. Similar effects occur when transferring the funds to the poor, e.g. via consumption subsidies or cash transfers. Consequently, financing and transfer mechanisms of poverty eradication policies need to be considered simultaneously.

The present paper proposes a CGE-microsimulation framework which endogenizes the poverty lines of individual households and thus the poverty status to determine the cost and efficiency of different combinations of financing and transfer mechanisms for a given poverty reduction target. The model is calibrated and parameterised for Uganda and integrates all households of a national household survey.

The study intends to aid thinking about the issue rather than estimating the true cost of poverty eradication. It finds that the interaction between the two mechanisms can have a strong impact on the cost and efficiency of the eradication policy and it points to limits for certain combinations of mechanisms. Tracing back the structural sources of these differences and limits, we derive implications important when scaling up such policies.

Resource Details (Export Citation) GTAP Keywords
Category: 2020 Conference Paper
Status: Published
By/In: Presented during the 23rd Annual Conference on Global Economic Analysis (Virtual Conference)
Date: 2020
Created: Boysen, O. (4/15/2020)
Updated: Boysen, O. (6/18/2020)
Visits: 1,035
- Economic analysis of poverty
- Economic development
- Africa (East)

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