Simulating the Poverty Impact of Macroeconomic Shocks and Policies

Developing countries face a host of macroeconomic challenges in the design and implementation of development strategies and policies. The importance of the underlying poverty and distributional issues creates a need for relevant and reliable ways of tracking the social impact of shocks and policies. This paper describes and demonstrates the use of a stylized framework for simulating the poverty implications of the Dutch disease, a change in the terms of trade and budgetary policy. The basic approach is to embed a Lorenz model of the size distribution of economic welfare in a general equilibrium model of an open economy. It is observed that, while aggregate welfare and poverty effects may be negligible, the structural and distributional impacts tend to be significant. The latter drive the political economy of policymaking and point to the need for an analytical framework that accounts for both the structural richness of the economy and the heterogeneity of the stakeholders

Bibliographic Details

Main Author:	Essama-Nssah, B.
Language:	English
Published:	World Bank, Washington, DC 2005-12
Subjects:	ADVERSE EFFECT, ADVERSE IMPACT, AGGREGATE DEMAND, AGGREGATE INCOME, BASE YEAR, BENCHMARK, BETWEEN-GROUP INEQUALITY, CASH CROPS, CHANGES IN POVERTY, CIRCULAR FLOW, COMPETITIVENESS, CONSTANT ELASTICITY, CONSTANT RETURNS, CONSTANT RETURNS TO SCALE, CONSUMER, CONSUMPTION INCREASES, CUMULATIVE DISTRIBUTION, CUMULATIVE DISTRIBUTION FUNCTION, DATA AVAILABILITY, DATA SET, DEBT, DECOMPOSABLE POVERTY, DECOMPOSABLE POVERTY MEASURES, DEMAND FUNCTIONS, DENSITY FUNCTION, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, DEVELOPMENT ECONOMICS, DEVELOPMENT POLICY, DEVELOPMENT STRATEGIES, DISTRIBUTIONAL IMPACT, DISTRIBUTIONAL IMPLICATIONS, ECONOMIC ACTIVITY, ECONOMIC GROWTH, ECONOMIC PERFORMANCE, ECONOMIC POLICY, ECONOMIC REFORM, ECONOMIC SURVEYS, ECONOMIC SYSTEMS, ECONOMICS, ELASTICITY, ELASTICITY OF SUBSTITUTION, EMPIRICAL MODEL, ENDOGENOUS VARIABLES, EQUILIBRIUM, EQUILIBRIUM PRICES, EQUILIBRIUM VALUES, EXCHANGE RATE, EXCHANGE RATES, EXOGENOUS SHOCKS, EXOGENOUS VARIABLES, EXPORTS, FACTOR DEMAND, FISCAL POLICY, FOOD CONSUMPTION, FOOD POLICY, FOREIGN EXCHANGE, FUNCTIONAL DISTRIBUTION, FUNCTIONAL FORM, GDP, GENERAL EQUILIBRIUM ANALYSIS, GENERAL EQUILIBRIUM MODEL, GINI COEFFICIENT, HOUSEHOLD DATA, HOUSEHOLD EXPENDITURES, IMPACT OF SHOCKS, IMPERFECT COMPETITION, IMPORT, IMPORTS, INCENTIVE EFFECTS, INCOME, INCOME DISTRIBUTION, INCOME EFFECT, INEQUALITY MEASURES, INTERNATIONAL TRADE, LORENZ CURVE, MACROECONOMIC ADJUSTMENT, MACROECONOMIC EFFECTS, MACROECONOMIC SHOCKS, MACROECONOMIC STABILITY, MACROECONOMICS, MEASURING POVERTY, MONETARY POLICIES, MONETARY POLICY, NUTRITION, OPEN ECONOMY, OPTIMIZING BEHAVIOR, POLICY ANALYSIS, POLICY ISSUES, POLICY RESEARCH, POLICY REVIEW, POLITICAL ECONOMY, POVERTY ANALYSIS, POVERTY DECLINES, POVERTY GAP, POVERTY IMPACT, POVERTY INCIDENCE, POVERTY INCREASES, POVERTY LINE, POVERTY MEASUREMENT, POVERTY REDUCTION, PRIVATE SECTOR, PRODUCTION FUNCTIONS, PROFIT MAXIMIZATION, PUBLIC EXPENDITURE, REAL INCOME, REGRESSION ANALYSIS, RELATIVE INEQUALITY, RESEARCH, RURAL AREA, RURAL HOUSEHOLD, RURAL HOUSEHOLDS, RURAL POPULATION, RURAL POVERTY, RURAL POVERTY INCIDENCE, RURAL POVERTY REDUCTION, SALES, STRUCTURAL ADJUSTMENT, SUBSTITUTION EFFECT, TAXATION, TOTAL POVERTY, TRADABLE SECTORS, TRADE BALANCE, TRADE LIBERALIZATION, TRADE POLICIES, URBAN AREAS, URBAN POVERTY, USER, WELFARE INDICATOR,
Online Access:	http://documents.worldbank.org/curated/en/2005/12/6460238/simulating-poverty-impact-macroeconomic-shocks-policies https://hdl.handle.net/10986/8543
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