Liberalizing Trade, and Its Impact on Poverty and Inequality in Nicaragua

The Doha round of multilateral trade negotiations stalled in 2008 owing in no small degree to a lack of agreement on the terms of substantially reducing trade-distorting support for agricultural products and to what extent this will be beneficial to developing countries. Nicaragua presents an interesting case in point, being one of the poorest economies in Latin America with still a relatively large agricultural sector and high degrees of rural poverty. In 2005, the country signed a free trade agreement with the United States. This chapter provides a quantitative analysis addressing that question. It does so using a computable general equilibrium (CGE) model for Nicaragua coupled with a micro-simulation methodology. The first section provides background information on trade reform policies and macroeconomic trends in Nicaragua, with special reference to the agricultural sector and rural poverty. The section that follows describes the main features of the CGE model and the micro-simulation methodology used to assess the impact on poverty and inequality. The author then lay out the model scenarios considered, which include liberalizations of agricultural and all merchandise goods trade by the rest of the world and by Nicaragua itself. That is followed by a summary analysis of results. This analysis includes tests for the sensitivity of the results with respect to assumptions regarding the responsiveness of trade to price liberalization, as identified through the relevant trade elasticities. The final section provides conclusions and possible policy implications.

Bibliographic Details

Main Authors:	Sánchez, Marco V., Vos, Rob
Format:	Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2009-06
Subjects:	AGGREGATE IMPORTS, AGRICULTURAL COMMODITIES, AGRICULTURAL INCENTIVES, AGRICULTURAL INCOMES, AGRICULTURAL MARKETS, AGRICULTURAL PRODUCTION, AGRICULTURAL PRODUCTS, AGRICULTURAL SUPPORT, AGRICULTURAL TRADE, AGRICULTURAL TRADE LIBERALIZATION, AGRICULTURE, APPAREL, AVERAGE TARIFF, BASE YEAR, BILATERAL AGREEMENTS, BILATERAL TRADE, CAPITAL FLOWS, CAPITAL GOOD, CAPITAL GOODS, CAPITAL INFLOWS, CAPITAL MARKET, CAPITAL STOCK, CAPITAL STOCKS, CD, CENTRAL BANK, CIVIL WAR, COMMODITIES, COMMODITY, COMMODITY PRICE, COMMODITY PRICES, COMMON MARKET, CONSUMER PRICE INDEX, CONSUMER PRICES, CONSUMERS, COUNTERFACTUAL SIMULATIONS, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, CUSTOMS PROCEDURES, DEFLATORS, DEMAND FOR CAPITAL, DEMOGRAPHIC, DEMOGRAPHIC CHANGE, DEVELOPING COUNTRIES, DEVELOPMENT ASSISTANCE, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DOMESTIC MARKET, DOMESTIC MARKETS, DOMESTIC PRICE, DOMESTIC PRICES, DOMESTIC PRODUCERS, DOMESTIC PRODUCTION, ECONOMIC INTEGRATION, ECONOMIC SECTORS, ECONOMIC WELFARE, ELASTICITY, ENDOGENOUS VARIABLES, EPZ, EQUILIBRIUM, EXCHANGE RATE, EXOGENOUS VARIABLES, EXPORT COMMODITY, EXPORT EARNINGS, EXPORT GROWTH, EXPORT PRICE, EXPORT PRICES, EXPORT PROCESSING, EXPORT PROCESSING ZONE, EXPORT SUBSIDIES, EXPORT SUPPLY, EXPORT TAXES, EXPORTERS, EXPORTS, EXPOSURE, EXTERNAL TERMS OF TRADE, EXTREME POVERTY, FACTORS OF PRODUCTION, FINANCIAL INSTITUTIONS, FISCAL DEFICIT, FIXED INVESTMENT, FOREIGN CURRENCY, FOREIGN DIRECT INVESTMENT, FREE ACCESS, FREE TRADE, FREE TRADE AGREEMENT, GDP, GENERAL EQUILIBRIUM, GENERAL EQUILIBRIUM ANALYSIS, GINI COEFFICIENT, GLOBAL COMPETITION, GLOBAL TRADE, GLOBAL TRADE ANALYSIS, GROSS DOMESTIC PRODUCT, GROWTH RATE, GROWTH RATES, HUMAN CAPITAL, IMPACT OF TRADE, IMPACT OF TRADE LIBERALIZATION, IMPORT, IMPORT COMPETITION, IMPORT CONTENT, IMPORT DUTIES, IMPORT PRICES, IMPORT PROTECTION, IMPORT TARIFF, IMPORT TARIFFS, INCOME, INCOME LEVELS, INCOMES, INDEXATION, INDUSTRIAL PRODUCTS, INVENTORY, LABOR MARKET, LABOR MARKET ADJUSTMENT, LABOR MARKET OUTCOMES, LABOR MARKET STRUCTURE, LABOR MARKETS, LIBERALIZATION OF TRADE, LIBERALIZATIONS, LIVING STANDARDS, LOCAL CURRENCY, MACROECONOMIC INSTABILITY, MACROECONOMIC POLICIES, MARGINAL PROPENSITY TO SAVE, MARKET ACCESS, MARKET CONDITIONS, MARKET PRICES, MARKET STRUCTURE, MARKET STRUCTURES, MONOPOLIES, MULTILATERAL TRADE, MULTILATERAL TRADE LIBERALIZATION, NET CAPITAL, OUTPUT, PER CAPITA INCOME, POPULATION AGEING, POVERTY REDUCTION, PREFERENTIAL ACCESS, PREFERENTIAL MARKET ACCESS, PRICE DISTORTIONS, PRICE LIBERALIZATION, PRICE SUPPORT, PRIMARY GOODS, PRIVATE INVESTMENT, PRIVATE SAVINGS, PRODUCTION COSTS, PRODUCTIVITY, PRODUCTIVITY GROWTH, PROFIT MAXIMIZATION, PROTECTION DATA, PROTECTION STRUCTURE, PUBLIC UTILITY, QUANTITATIVE RESTRICTIONS, QUOTAS, RATE OF GROWTH, REAL EXCHANGE RATE, REAL GDP, REAL WAGE GROWTH, REGIONAL TRADE, RULES OF ORIGIN, RURAL INFRASTRUCTURE, SAFEGUARD MEASURES, SAVINGS, SKILLED WORKERS, TARIFF RATE, TARIFF RATES, TARIFF REDUCTION, TARIFF REDUCTIONS, TARIFF REVENUES, TARIFFS ON IMPORTS, TAX, TAX RATE, TAX RATES, TAXATION, TERMS OF TRADE, TOTAL EXPORTS, TOTAL FACTOR PRODUCTIVITY, TRADE BALANCE, TRADE BARRIERS, TRADE DEFICIT, TRADE EFFECTS, TRADE FLOWS, TRADE LIBERALIZATION, TRADE MODELS, TRADE NEGOTIATIONS, TRADE OPENING, TRADE OPENNESS, TRADE POLICIES, TRADE POLICY, TRADE PREFERENCES, TRADE PROTECTION, TRADE REFORM, TRADE SHOCK, TRADE SHOCKS, TRADE STRUCTURE, TRADE TAX, TRADE TAXES, TRADING PARTNER, TRADING PARTNERS, UNEMPLOYMENT, UNEMPLOYMENT RATE, UNEMPLOYMENT RATES, UNILATERAL LIBERALIZATION, UNILATERAL TRADE, UNILATERAL TRADE LIBERALIZATION, UNSKILLED WORKERS, VALUE ADDED, VALUE OF EXPORTS, VALUE OF IMPORTS, VOLATILITY, WAGE GROWTH, WAGES, WELFARE GAINS, WORLD DEVELOPMENT INDICATORS, WORLD MARKET, WORLD MARKETS, WORLD PRICES, WORLD TRADE, WTO,
Online Access:	http://documents.worldbank.org/curated/en/282841468110038167/Liberalizing-trade-and-its-impact-on-poverty-and-inequality-in-Nicaragua https://hdl.handle.net/10986/28145
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