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

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.

Bibliographic Details

Main Authors:	Annabi, Nabil, Khondker, Bazlul, Raihan, Selim, Cockburn, John, Decaluwe, Bernard
Language:	English
Published:	World Bank, Washington, DC 2006-08
Subjects:	ACCUMULATION RATE, AGRICULTURAL OUTPUT, AGRICULTURAL PRICES, AGRICULTURAL SECTOR, AGRICULTURAL SECTORS, AGRICULTURAL SUPPORT, AGRICULTURAL TRADE, AGRICULTURAL TRADE LIBERALIZATION, AGRICULTURE, AVERAGE TARIFF, BASKET OF GOODS, CAPITAL ACCUMULATION, CAPITAL INCREASE, CAPITAL STOCK, CHANGES IN POVERTY, COMMERCIAL CROPS, CONSTANT ELASTICITY OF TRANSFORMATION, CONSUMER PRICE, CONSUMER PRICE INDEX, CONSUMER PRICE INDICES, CONSUMER PRICES, CONSUMERS, CONSUMPTION LEVELS, COST OF LIVING, COTTON PRODUCTION, COUNTERFACTUAL, CURRENCY, CURRENT ACCOUNT, CURRENT ACCOUNT BALANCE, DEBT, DEMAND CURVE, DEMAND FUNCTION, DEVALUATION, DIVIDENDS, DOMESTIC DEMAND, DOMESTIC MARKET, DOMESTIC PRICE OF IMPORTS, DOMESTIC PRICES, ECONOMIC GROWTH, ECONOMIC POLICIES, ELASTICITY, ENDOGENOUS VARIABLES, EXCHANGE RATE REGIME, EXPENDITURE, EXPORT GROWTH, EXPORT MARKET, EXPORT ORIENTATION, EXPORT PRICES, EXPORT SUBSIDIES, EXPORT TAXES, EXPORTS, EXTERNAL TRADE, FACTOR MARKETS, FACTORS OF PRODUCTION, FARMERS, FOOD GRAINS, FOOD PRICES, FOOD PROCESSING, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FREE TRADE, FULL LIBERALIZATION, FULL TRADE LIBERALIZATION, GLOBAL FREE TRADE, GLOBAL TRADE, GROWTH RATE, HOUSEHOLD HEAD, HOUSEHOLD INCOME, HOUSEHOLD SURVEY, HOUSEHOLD WELFARE, HUMAN DEVELOPMENT, IMPERFECT SUBSTITUTES, IMPORT COMPETITION, IMPORT DUTY, IMPORT PENETRATION, IMPORT PRICES, INCOME, INCOME EFFECTS, INCOME GAINS, INCOME SHARES, INCOME TAXES, INEQUALITY, INTENSIVE AGRICULTURE, INTERNATIONAL MARKET, LANDLESS HOUSEHOLDS, LOST TARIFF REVENUES, MARKETING, NATIONAL INCOME, NOMINAL INCOME, OPTIMIZATION, POOR, POOR HOUSEHOLDS, POORER HOUSEHOLD, POORER HOUSEHOLDS, POSITIVE EFFECTS, POVERTY ANALYSIS, POVERTY GAP, POVERTY IMPACT, POVERTY INDICES, POVERTY LINE, POVERTY LINES, POVERTY MEASURES, POVERTY PROFILE, POVERTY RATES, POVERTY REDUCTION, PRICE INCREASES, QUANTITATIVE RESTRICTIONS, REAL GDP, REAL INTEREST RATE, RURAL, RURAL AREAS, RURAL HOUSEHOLDS, RURAL INCOMES, SALES, SAVINGS, SMALL FARMER, SMALL FARMERS, STOCKS, SUBSTITUTE, SUBSTITUTION, TARIFF RATE, TARIFF RATES, TECHNOLOGY TRANSFER, TERMS OF TRADE, TEXTILE IMPORTS, TRADE LIBERALIZATION, TRADE MODELS, TRADE POLICIES, TRADE POLICY, TRANSFERS, UNILATERAL TRADE, UNILATERAL TRADE LIBERALIZATION, UNILATERAL TRADE POLICY, UNSKILLED LABOR, UNSKILLED WORKERS, URUGUAY ROUND, UTILITY FUNCTION, VALUE ADDED, WAGE RATES, WAGES, WELFARE GAINS, WELFARE IMPACTS, WELFARE LOSSES, WORLD MARKET, WORLD PRICES, WORLD TRADE, WTO,
Online Access:	http://documents.worldbank.org/curated/en/2006/08/6951154/implications-wto-agreements-unilateral-trade-policy-reforms-poverty-bangladesh-short-versus-long-run-impacts https://hdl.handle.net/10986/8370
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