Agriculture-Sector Policies and Poverty in the Philippines: A Computable General-Equilibrium (CGE) Analysis

MPIA Working Paper No. 2006-09

44 Pages Posted: 7 May 2007

See all articles by Caesar B. Cororaton

Caesar B. Cororaton

International Food Policy Research Institute (IFPRI)

Erwin Corong

De La Salle University

Abstract

The Philippines has undertaken substantial trade-policy reforms since the 1980s. However, the poverty impact is not very clear and has been the subject of intense debate, most crucial of which is the likely poverty effects of liberalizing the highly protected agricultural sector. A CGE micro-simulation model is employed to estimate and explain these impacts. Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, the prevalence of cheap, imported inputs reduces the domestic cost of production, benefiting the outward-oriented and import-dependent industrial sector as their output and export increases. The national poverty headcount decreases marginally as lower consumer prices outweigh the income reduction experienced by the majority of households. However, both the poverty gap and severity of poverty worsens, implying that the poorest of the poor become even poorer.

Keywords: Agriculture, international trade, poverty, computable general equilibrium, micro-simulation, Philippines

JEL Classification: D58, E27, F13, I32, O13, O15, O24, O53, Q10

Suggested Citation

Cororaton, Caesar B. and Corong, Erwin, Agriculture-Sector Policies and Poverty in the Philippines: A Computable General-Equilibrium (CGE) Analysis. MPIA Working Paper No. 2006-09, Available at SSRN: https://ssrn.com/abstract=984521 or http://dx.doi.org/10.2139/ssrn.984521

Caesar B. Cororaton (Contact Author)

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

Erwin Corong

De La Salle University ( email )

Manila, 1004
Philippines

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