Poverty and Shared Prosperity Implications of Deep Integration in Eastern and Southern Africa

61 Pages Posted: 17 May 2016

See all articles by Edward J. Balistreri

Edward J. Balistreri

Iowa State University

Maryla Maliszewska

World Bank

Israel Osorio-Rodarte

World Bank

David G. Tarr

International Trade Analysis

Hidemichi Yonezawa

Statistics Norway

Date Written: May 4, 2016

Abstract

Evidence indicates that trade costs are a much more substantial barrier to trade than tariffs are, especially in Sub-Saharan Africa. This paper decomposes trade costs into: (i) trade facilitation, (ii) non-tariff barriers, and (iii) the costs of business services. The paper assesses the poverty and shared prosperity impacts of deep integration to reduce these three types of trade costs in: (i) the East African Customs Union?Common Market of East and Southern Africa?South African Development Community "Tripartite" Free Trade Area; (ii) within the East African Customs Union; and (iii) unilaterally by the East African Customs Union. The analysis employs an innovative, multi-region computable general equilibrium model to estimate the changes in the macroeconomic variables that impact poverty and shared prosperity. The model estimates are used in the Global Income Distribution Dynamics microsimulation model to obtain assessments of the changes in the poverty headcount and shared prosperity for each of the simulations for the six African regions or countries. The paper finds that these reforms are pro-poor. There are significant reductions in the poverty headcount and the percentage of the population living in poverty for all six of the African regions from deep integration in the Tripartite Free Trade Area or comparable unilateral reforms by the East African Customs Union. Further, the incomes of the bottom 40 percent of the populations noticeably increase in all countries or regions that are engaged in the trade reforms. The reason for the poor share in prosperity is the fact that the reforms increase unskilled wages faster than the rewards of other factors of production, as the reforms tend to favor agriculture. Despite the uniform increases in income for the poorest 40 percent, there are some cases where the share of income captured by the poorest 40 percent of the population decreases. The estimated gains vary considerably across countries and reforms. Thus, countries would have an interest in negotiating for different reforms in different agreements.

Keywords: Trade Facilitation, Trade and Multilateral Issues, Inequality, International Trade and Trade Rules

Suggested Citation

Balistreri, Edward J. and Maliszewska, Maryla and Osorio-Rodarte, Israel and Tarr, David G. and Yonezawa, Hidemichi, Poverty and Shared Prosperity Implications of Deep Integration in Eastern and Southern Africa (May 4, 2016). World Bank Policy Research Working Paper No. 7660, Available at SSRN: https://ssrn.com/abstract=2781017

Edward J. Balistreri (Contact Author)

Iowa State University ( email )

260 Heady Hall
Ames, IA 50011
United States
3032531674 (Phone)

Maryla Maliszewska

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Israel Osorio-Rodarte

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

David G. Tarr

International Trade Analysis ( email )

7901 Hispanola Avenue
Apt. 1102
North Bay Village, FL 33141
United States
5712242796 (Phone)

HOME PAGE: http://https://sites.google.com/site/davidgtarr/

Hidemichi Yonezawa

Statistics Norway ( email )

N-0033 Oslo
Norway

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