Poverty, inequality and welfare effects on trade liberalization in Côte d'Ivoire : a computable general equilibrium model analysis

Abstract

This paper attempts to quantify the effects of removing trade taxes and instituting some necessary fiscal reform on poverty and income distribution in Cote d'lvoire. It first analyses income distribution for various homogenous socioeconomic groups using an absolute poverty line based on the constant basic needs approach. Next it simulates and analyses in a computable general equilibrium (CGE) model the impact on poverty, inequality and welfare of the elimination of taxes on agricultural exports and imports combined with a change in the domestic tax rate. The results show that poverty increases for all households, but depending on the simulations the situation is diversified among socioeconomic groups. Liberalizing trade by removing tax on exports leads to an increase in domestic prices of agricultural and industrial goods, resulting in an increase in the consumer price index and a decrease in households' disposable income and thus in their consumption. Public employees are identified as the most affected by poverty following trade tax reform. JEL classification: C68; F15; 131; 132; 015 Keywords: Trade liberalization, Regional integration, Fiscal policy, Poverty, Inequality, Welfare, CGE.