Trade Liberalization and Spatial Inequality: A Methodological Innovation in Vietnamese Perspective

UNU-WIDER research paper 01/2004; 2004/35

Posted: 14 Dec 2014

See all articles by Finn Tarp

Finn Tarp

University of Copenhagen - Department of Economics

Henning Tarp Jensen

University of Copenhagen - Institute of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: January 1, 2004

Abstract

In this paper we calibrate two static computable general equilibrium (CGE) models with respectively 16 and 5,999 representative households. Aggregated and disaggregated household categories are consistently embedded in a 2000 social accounting matrix for Vietnam, mapping on a one-to-one basis to each other. Distinct differences in poverty assessments emerge when the impact of trade liberalization is analyzed in the two models. This highlights the importance of modeling micro household behavior and related income and expenditure distributions endogenously within a static CGE model framework. Our simulations indicate that poverty will rise following a revenue-neutral lowering of trade taxes. This is interpreted as a worst case scenario, which suggests that government should be proactive in combining trade liberalization measures with a propoor fiscal response to avoid increasing poverty in the short to medium term.

Keywords: poverty, trade liberalization, general equilibrium models, Vietnam

JEL Classification: D58, I32, O53

Suggested Citation

Tarp, Finn and Jensen, Henning Tarp, Trade Liberalization and Spatial Inequality: A Methodological Innovation in Vietnamese Perspective (January 1, 2004). UNU-WIDER research paper 01/2004; 2004/35, Available at SSRN: https://ssrn.com/abstract=2537931

Finn Tarp (Contact Author)

University of Copenhagen - Department of Economics ( email )

Ă˜ster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

Henning Tarp Jensen

University of Copenhagen - Institute of Economics ( email )

Studiestraede 6
DK-1455 Copenhagen K
Denmark

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