Does Trade Liberalisation Lead to Poverty Alleviation? A CGE Microsimulation Approach for Zimbabwe

MPIA Working Paper No. 2006-18

24 Pages Posted: 9 May 2007 Last revised: 14 Aug 2014

See all articles by M. Chitiga

M. Chitiga

University of Pretoria - Department of Economics

Ramos Mabugu

University of Zimbabwe

Date Written: December 2006

Abstract

A CGE microsimulation model is used to study the poverty impacts of trade liberalization in Zimbabwe. A sample of 14006 households from a 1995 household survey is individually modeled in a CGE framework. The experiment performed is a 50 percent reduction in all import tariffs. The sectors with the highest initial tariffs are the non-export agriculture sectors and the most export-intensive sectors are found in agriculture and in mining. The halving of tariffs favors export-oriented sectors, mainly in agriculture, whereas industrial sectors are hardest hit by the increased import competition. As agriculture is intensive in unskilled labor and industry is intensive in skilled labor, unskilled wages rise relative to skilled wages. The consumer prices fall and this, together with increased unskilled wages, leads to a fall in poverty. The fall in the price of manufactured food, which is consumed mainly in urban areas, coupled with the large number of unskilled workers in these urban areas, explains why poverty falls more here than in rural Zimbabwe.

Keywords: Computable General Equilibrium, Trade Liberalisation, Microsimulation, Poverty

JEL Classification: C68, D31, D58, I32

Suggested Citation

Chitiga, Margaret Mabugu and Mabugu, Ramos, Does Trade Liberalisation Lead to Poverty Alleviation? A CGE Microsimulation Approach for Zimbabwe (December 2006). MPIA Working Paper No. 2006-18. Available at SSRN: https://ssrn.com/abstract=985102 or http://dx.doi.org/10.2139/ssrn.985102

Margaret Mabugu Chitiga (Contact Author)

University of Pretoria - Department of Economics ( email )

Lynnwood Road
Hillcrest
Pretoria 0002
South Africa

Ramos Mabugu

University of Zimbabwe

c/o Hall Farm, Wenhaston
Suffolk Ip19 9HE, Mashonaland
United Kingdom

Register to save articles to
your library

Register

Paper statistics

Downloads
103
Abstract Views
585
rank
256,752
PlumX Metrics