The Impact of Trade Reform in the 1990s on Welfare and Poverty in the Philippines

Abstract

This paper analyzes the impact of trade reform on welfare and poverty in the Philippines in the 1990s using a CGE model. The results indicate that while welfare rises and poverty falls for all household groups except the poorest (those with rural unskilled private employees as household head), urban households gain more than rural households. Policy experiments involving full tariff reduction and uniform five percent tariff rate indicate generally the same pattern of effects, except that the magnitude of change is relatively larger in the former while all household groups, including the poorest, experience a reduction in poverty in the latter. Since poverty remains high and the disparity between rural and urban poverty is still wide, other poverty-reducing measures have to be designed and implemented to target those households that do not benefit much from this type of market reform.

Keywords: computable general equilibrium, international trade, poverty, Philippines

JEL Classification: D33, D58, E27, F13, F14, I32, O15, O53