Implications of WTO Agreements and Unilateral Trade Policy Reforms for Poverty in Bangladesh: Short Versus Long-Run Impacts

44 Pages Posted: 20 Apr 2016

See all articles by Nabil Annabi

Nabil Annabi

Université Laval - Département d'Économique

John Cockburn

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

Bernard Decaluwe

Université Laval - Département d'Économique

Bazlul Khondker

University of Dhaka

Selim Raihan

University of Dhaka

Date Written: August 1, 2006

Abstract

The authors examine the effects of WTO agreements and domestic trade policy reforms on production, welfare, and poverty in Bangladesh. They use a sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, allowing for long-run analysis. The study is based on the 2000 Social Accounting Matrix (SAM) of Bangladesh including 15 production sectors, four factors of production (skilled and unskilled labor, agricultural and nonagricultural capital), and nine household groups (five in rural areas and four in urban areas). To examine the link between the macroeconomic effects and microeconomic effects in terms of poverty, the authors 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 macroeconomy, 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 liberalization induces an expansion of agricultural and light manufacturing sectors, favorable 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 households the biggest winners in terms of welfare and poverty reduction. (4) Domestic liberalization 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: Economic Theory & Research, Rural Poverty Reduction, Free Trade, Markets and Market Access

Suggested Citation

Annabi, Nabil and Cockburn, John and Decaluwe, Bernard and Khondker, Bazlul and Raihan, Selim, Implications of WTO Agreements and Unilateral Trade Policy Reforms for Poverty in Bangladesh: Short Versus Long-Run Impacts (August 1, 2006). World Bank Policy Research Working Paper No. 3976. Available at SSRN: https://ssrn.com/abstract=923283

Nabil Annabi (Contact Author)

Université Laval - Département d'Économique ( email )

Quebec
Canada

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)

Bazlul Khondker

University of Dhaka

University of Dhaka
Ramna, Dhaka, 1000
Bangladesh

Selim Raihan

University of Dhaka ( email )

University of Dhaka
Ramna, Dhaka, 1000
Bangladesh

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