Publication: Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions
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Published
2011
ISSN
03785920
Date
2012-03-30
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Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries, yet global trade in farm products continues to be far more distorted than trade in non-farm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modelling. This article summarises a series of new economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global Linkage model results suggest that removing those remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 per cent. The analysis based on the Global Trade Analysis Project model for a sample of 15 countries, and nine stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.
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Publication Would Freeing Up World Trade Reduce Poverty and Inequality? The Vexed Role of Agricultural Distortions(2011-03-01)Trade policy reforms in recent decades have sharply reduced the distortions that were harming agriculture in developing countries, yet global trade in farm products continues to be far more distorted than trade in nonfarm goods. Those distortions reduce some forms of poverty and inequality but worsen others, so the net effects are unclear without empirical modeling. This paper summarizes a series of new economy-wide global and national empirical studies that focus on the net effects of the remaining distortions to world merchandise trade on poverty and inequality globally and in various developing countries. The global LINKAGE model results suggest that removing those remaining distortions would reduce international inequality, largely by boosting net farm incomes and raising real wages for unskilled workers in developing countries, and would reduce the number of poor people worldwide by 3 percent. The analysis based on the Global Trade Analysis Project model for a sample of 15 countries, and nine stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.Publication Agricultural Price Distortions, Inequality, and Poverty(World Bank, Washington, DC, 2009-08)Reforms in recent decades have sharply reduced the distortions affecting agriculture in developing countries, particularly by cuts to agricultural export taxes and by some reductions in government assistance to agriculture in high-income countries, but international trade in farm products continues to be far more distorted than trade in nonfarm goods. This paper summarizes a series of empirical studies that focus on the effects of the remaining distortions to world merchandise trade for poverty and inequality, especially in developing countries. To obtain different insights into the various impacts, two global studies are undertaken using the World Bank's Linkage model, one multi-country study uses the Global Trade Analysis Project (GTAP) model, and ten country case studies are also included, each using a national economy-wide model. The Linkage model results suggest that liberalization will reduce international inequality, largely by boosting farm incomes and raising real wages for unskilled workers in developing countries, and will reduce the number of poor people worldwide by 3 percent. The analysis based on the GTAP model for a sample of 15 countries, and the ten stand-alone national case studies, all point to larger reductions in poverty, especially if only the non-poor are subjected to increased income taxation to compensate for the loss of trade tax revenue.Publication Agricultural Price Distortions, Inequality, and Poverty(World Bank, 2010)For decades, the earnings from farming in many developing countries have been depressed because of a pro-urban, anti-agricultural bias in own-country policies and because governments in more well off countries are favoring their farmers by imposing import barriers and providing subsidies. These policies have reduced national and global economic welfare, inhibited economic growth, and added to inequality and poverty because no less than three-quarters of the billion poorest people in the world have been dependent directly or indirectly on farming for their livelihoods (World Bank 2007). The purpose of the rest of this chapter is to outline the analytical framework and the common empirical methodology adopted in the global and national case studies reported in subsequent chapters, to summarize and compare the modeling results from the global and national models, and to draw some general policy implications. The findings are based on three chapters (part two) that each use a global model to examine the effects of farm and nonfarm price and trade policies on global poverty and the distribution of poverty within and across many of the countries identified, plus ten individual developing-country studies (parts three-five) spanning the three key regions: Asia (where nearly two-thirds of the world's poor live), Sub-Saharan Africa, and Latin America.Publication Agricultural Price Distortions, Poverty, and Inequality in the Philippines(World Bank, Washington, DC, 2009-06)This paper analyzes the poverty and inequality implications of removing agricultural and non-agricultural price distortions in the domestic market of the Philippines and abroad. Liberalization in the rest of the world is poverty and inequality reducing, whereas full domestic liberalization increases national poverty and inequality. Poverty declines while inequality increases marginally in the combined scenario of both global and domestic agriculture reform. Although the reduction in the national poverty headcount is small in the latter scenario, the poorest of the poor, particularly those living in the rural areas, emerge as 'winners', given their strong reliance on agricultural production and unskilled labor wages.Publication Measuring Distortions to Agricultural Incentives, Revisited(2008)Notwithstanding the tariffication component of the Uruguay Round Agreement on Agriculture, import tariffs on farm products continue to provide an incomplete indication of the extent to which agricultural producer and consumer incentives are distorted in national markets. As well, in developing countries especially, non-agricultural policies indirectly impact on agricultural and food markets. Empirical analysis aimed at monitoring distortions to agricultural incentives thus need to examine both agricultural and non-agricultural policy measures including import or export taxes, subsidies, and quantitative restrictions plus domestic taxes or subsidies on farm outputs or inputs and consumer subsidies for food staples. This paper addresses the practical methodological issues that need to be faced when attempting to undertake such a measurement task in developing countries. The approach is illustrated in two ways: by presenting estimates of nominal and relative rates of assistance to farmers in China for the period 1981-2005; and by summarizing estimates from an economy-wide CGE model of the effects on agricultural versus non-agricultural markets of the project's measured distortions globally as of 2004.
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