Implications of WTO Agreements and Domestic Trade Policy Reforms for Poverty in Bangladesh: Short vs. Long Run Impacts

PEP-MPIA Paper No. 2005-02

43 Pages Posted: 24 Jun 2005 Last revised: 12 Jul 2018

See all articles by Nabil Annabi

Nabil Annabi

Université Laval - Département d'Économique

H. Khondker Bazlul

University of Dhaka

Selim Raihan

University of Dhaka

John Cockburn

Partnership for Economic Policy (PEP); Université Laval; Partnership for Economic Policy (PEP)

Bernard Decaluwe

Université Laval - Département d'Économique

Date Written: June 1, 2005

Abstract

We examine the impacts of WTO agreements and domestic trade policy reforms on production, welfare and poverty in Bangladesh. A sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, is used allowing for long run analysis. The study is based on 2000 SAM of Bangladesh including fifteen production sectors, four factors of production (skilled and unskilled labour, agricultural and non-agricultural capital) and nine household groups (five in rural areas and four in urban areas) based on the year 2000 household survey. To examine the link between the macro effects and micro effects in terms of poverty we use the representative household approach with actual intra-group income distributions. The study presents five simulations for which the major findings are: (1) the Doha scenario has negative implications for the overall macro economy, household welfare and poverty in Bangladesh. Terms of trade deteriorate and consumer prices, particularly food prices, increase more than nominal incomes, especially among poor households; (2) Free world trade has similar, but larger, impacts; (3) Domestic trade liberalisation induces an expansion of agricultural and light manufacturing sectors, favourable changes in the domestic terms of trade. Although the short run welfare and poverty impacts are negative, these turn positive in the long run when capital has adjusted through new investments. Rising unskilled wage rates make the poorest household the biggest winners in terms of welfare and poverty reduction; (4) Domestic liberalisation effects far outweigh those of free world trade when these scenarios are combined; (5) Remittances constitute a powerful poverty-reducing tool given their greater importance in the income of the poor.

Keywords: Dynamic CGE model, International trade, poverty

JEL Classification: D33, D58, E27, F17, I32, O15, O53

Suggested Citation

Annabi, Nabil and Bazlul, H. Khondker and Raihan, Selim and Cockburn, John and Decaluwe, Bernard, Implications of WTO Agreements and Domestic Trade Policy Reforms for Poverty in Bangladesh: Short vs. Long Run Impacts (June 1, 2005). PEP-MPIA Paper No. 2005-02. Available at SSRN: https://ssrn.com/abstract=749266 or http://dx.doi.org/10.2139/ssrn.749266

Nabil Annabi (Contact Author)

Université Laval - Département d'Économique ( email )

Quebec
Canada

H. Khondker Bazlul

University of Dhaka ( email )

University of Dhaka
Ramna, Dhaka, 1000
Bangladesh

Selim Raihan

University of Dhaka ( email )

University of Dhaka
Ramna, Dhaka, 1000
Bangladesh

John Cockburn

Partnership for Economic Policy (PEP) ( email )

P.O. Box 30772-00100
ICIPE - Duduville Campus, Kasarani
Nairobi
Kenya

Université Laval ( email )

Dept. of Economics
Québec, Quebec G1V 0A6
Canada

Partnership for Economic Policy (PEP) ( email )

Duduville Campus, Kasarani
P.O. Box 30772-00100
Nairobi
Kenya

Bernard Decaluwe

Université Laval - Département d'Économique ( email )

2325 Rue de l'Université
Ste-Foy, Quebec G1K 7P4 G1K 7P4
Canada
418-656-5561 (Phone)
418-656-7798 (Fax)

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