Poverty and Shared Prosperity Implications of Deep Integration in Eastern and Southern Africa
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World Bank, Washington, DC
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Evidence indicates that trade costs are
a much more substantial barrier to trade than tariffs are,
especially in Sub-Saharan Africa. This paper decomposes
trade costs into: (i) trade facilitation, (ii) non-tariff
barriers, and (iii) the costs of business services. The
paper assesses the poverty and shared prosperity impacts of
deep integration to reduce these three types of trade costs
in: (i) the East African Customs Union–Common Market of East
and Southern Africa–South African Development Community
"Tripartite" Free Trade Area; (ii) within the East
African Customs Union; and (iii) unilaterally by the East
African Customs Union. The analysis employs an innovative,
multi-region computable general equilibrium model to
estimate the changes in the macroeconomic variables that
impact poverty and shared prosperity. The model estimates
are used in the Global Income Distribution Dynamics
microsimulation model to obtain assessments of the changes
in the poverty headcount and shared prosperity for each of
the simulations for the six African regions or countries.
The paper finds that these reforms are pro-poor. There are
significant reductions in the poverty headcount and the
percentage of the population living in poverty for all six
of the African regions from deep integration in the
Tripartite Free Trade Area or comparable unilateral reforms
by the East African Customs Union. Further, the incomes of
the bottom 40 percent of the populations noticeably increase
in all countries or regions that are engaged in the trade
reforms. The reason for the poor share in prosperity is the
fact that the reforms increase unskilled wages faster than
the rewards of other factors of production, as the reforms
tend to favor agriculture. Despite the uniform increases in
income for the poorest 40 percent, there are some cases
where the share of income captured by the poorest 40 percent
of the population decreases. The estimated gains vary
considerably across countries and reforms. Thus, countries
would have an interest in negotiating for different reforms
in different agreements.
Palabras clave
TARIFFS, URUGUAY ROUND, EXPORT MARKETS, MARKET STRUCTURE, MULTILATERAL TRADE, WORLD TRADE ORGANIZATION, PRODUCTION, ELASTICITY OF SUPPLY, TRADE NEGOTIATIONS, STOCK, FOREIGN INVESTORS, INCOME, PROJECTIONS, TRADE BARRIERS, BENCHMARK EQUILIBRIUM, DISCOUNT RATE, UNILATERAL LIBERALIZATION, EXPORTS, ELASTICITY, MARGINAL PRODUCT, POLITICAL ECONOMY, PREFERENTIAL REDUCTION, WELFARE, SUPPLY CURVES, ECONOMIC IMPLICATIONS, OPTIMIZATION, MARKET SHARES, ECONOMIC POLICY, EQUILIBRIUM, DISTRIBUTION, FREE TRADE AGREEMENTS, MARKET ACCESS OPPORTUNITIES, VARIABLES, TRADE REFORMS, FOREIGN DIRECT INVESTORS, CAPITAL STOCK, PREFERENTIAL MARKET ACCESS, TARIFF EQUIVALENT, REAL INCOME, INPUTS, RETURNS TO SCALE, REDUCTION OF BARRIERS, EXTERNAL TRADE, MARKET ACCESS, FREE TRADE, AGRICULTURAL OUTPUT, TRADE AGREEMENTS, DOMESTIC CONSUMPTION, DEVELOPMENT, PER CAPITA INCOMES, PREFERENTIAL TRADE AGREEMENTS, FOREIGN TRADE, LIBERALIZATION OF TRADE IN GOODS, COSTS, PER CAPITA INCOME, DEVELOPMENT ECONOMICS, REGIONAL TRADE LIBERALIZATION, CENTRAL ELASTICITIES, TELECOMMUNICATIONS, TRADE INTEGRATION, FOREIGN SUPPLIERS, REGULATORY BARRIERS, PRIMARY FACTORS, RENT, REGIONAL TRADE, TARIFF REDUCTION, MACROECONOMIC MODELS, TARIFF BARRIER, IMPERFECT COMPETITION, CAPITAL GOOD, MARKETS, WTO, TARIFF REDUCTIONS, OPEN ECONOMY, PREFERENTIAL TARIFF REDUCTION, ACCESS, WELFARE GAINS, PREFERENTIAL AGREEMENTS, TRADE POLICY, ELASTICITY OF SUBSTITUTION, GENERAL EQUILIBRIUM MODEL, UTILITY, TRADE AGREEMENT, NATURAL RESOURCES, PREFERENTIAL TRADE LIBERALIZATION, TRADE POLICIES, ECONOMIC RESEARCH, EQUILIBRIUM ANALYSIS, UNEMPLOYMENT, BORDER TRADE, LIBERALIZATION OF TRADE, CONSUMPTION, VALUE ADDED, UNILATERAL TRADE, CAPITAL, WAGES, TRADE PREFERENCES, INTERNATIONAL TRADE, TRADE COSTS, VALUE, FOREIGN DIRECT INVESTMENT, PRODUCT DIFFERENTIATION, PURCHASING POWER, CONCESSIONS, TRADE REFORM, AGRICULTURE, CONSUMERS, TARIFF BARRIERS, TRADE AREA, TRADE FACILITATION, RETURN ON CAPITAL, MEASUREMENT, WAGE RATE, UNILATERAL REDUCTION, BENCHMARK, ECONOMIC THEORY, TRADE LIBERALIZATION, TERMS OF TRADE, REGULATORY REGIMES, TRADE DIVERSION, TRADE DATA, REGIONAL INTEGRATION, MACROECONOMIC SHOCKS, AGRICULTURAL PRODUCTS, TRADE, ECONOMIC INTEGRATION, GDP, GOODS, THEORY, AGGREGATE TRADE, GENERAL EQUILIBRIUM ANALYSIS, GLOBAL TRADE, MARKET SHARE, BILATERAL TRADE, MULTILATERAL TRADE REFORM, INVESTMENT, REGIONAL TRADE INTEGRATION, DOMESTIC PRODUCTION, CUSTOMS UNIONS, PREFERENTIAL TRADE, TERMS OF TRADE LOSS, TARIFF, FREE TRADE AREA, WORLD TRADE, UNILATERAL TRADE LIBERALIZATION, UNSKILLED WORKERS, PREFERENTIAL TARIFF, BENCHMARK DATA, MACROECONOMIC POLICIES, ECONOMIC GEOGRAPHY, APPAREL, PRICE INDEX, AGGREGATE EXPORTS, IMPORT VALUE, UNSKILLED LABOR, PRICES, UNILATERAL REFORMS, MULTILATERAL LIBERALIZATION, DEVELOPMENT POLICY, GENERAL EQUILIBRIUM MODELING