Niimi, YokoBussolo, Maurizio2012-06-212012-06-212006-02https://hdl.handle.net/10986/8743The main objective of this paper is to provide an ex-ante assessment of the poverty and income distribution impacts of the Central American Free Trade Area agreement on Nicaragua. The authors use a general equilibrium macro model to simulate trade reform scenarios and estimate their price effects, while a micro-module maps these price changes into real income changes at the individual household level. A useful insight from this analysis is that even if the final total impact on poverty is not too large, its dispersion across households-due to their heterogeneity of factor endowments, inputs use, commodity production, and consumption preferences-is significant and should be taken into account when designing compensatory policies. Additionally, growth and redistribution decomposition show that, at least in the short to medium run, redistribution can be as important as growth. The main policy message that emerges from the paper is that Nicaragua should consider enlarging its own liberalization to countries other than the United States to boost trade-induced poverty reductions.CC BY 3.0 IGOACCESS TO SERVICE MARKETSADJUSTMENT PROCESSAGGREGATE INCOMEAGRICULTURAL COMMODITIESAGRICULTURAL PRODUCTSAGRICULTUREAPPARELAUTONOMYBALANCE OF PAYMENTSBENCHMARKBENCHMARK EQUILIBRIUMCAPITAL ACCUMULATIONCAPITAL GOODSCAPITAL INFLOWSCAPITAL INPUTSCENTRAL AMERICACENTRAL AMERICANCOMMERCECONCESSIONSCONSTANT ELASTICITYCONSTANT ELASTICITY OF SUBSTITUTIONCONSTANT ELASTICITY OF TRANSFORMATIONCONSUMERCONSUMPTION PATTERNSCURRENT ACCOUNTDEPENDENT VARIABLEDEVELOPING COUNTRIESDISTRIBUTIONAL EFFECTSDIVIDENDSDOMESTIC DEMANDDOMESTIC MARKETDOMESTIC PRODUCTIONECONOMIC STRUCTUREELASTICITYELASTICITY OF SUBSTITUTIONEMPIRICAL EVIDENCEENDOGENOUS VARIABLESEQUILIBRIUMEXPENDITUREEXPLANATORY VARIABLESEXPORT ORIENTATIONEXPORT SECTORSEXPORT SUPPLYEXPORTSFACTOR ACCUMULATIONFACTOR CONTRIBUTIONSFACTOR ENDOWMENTSFACTOR INCOMEFACTOR MARKETSFACTOR PRICEFACTOR PRICESFACTORS OF PRODUCTIONFOOD CONSUMPTIONFOREIGN DIRECT INVESTMENTFOREIGN MARKETSFOREIGN PRODUCTIONFREE ACCESSFREE TRADEFREE TRADE AREAFULL LIBERALIZATIONFUNCTIONAL FORMSGENERAL EQUILIBRIUM MODELGEOGRAPHICAL VARIABLESGOVERNMENT EXPENDITURESGROWTH COMPONENTGROWTH RATESHOUSEHOLD INCOMEHOUSEHOLD INCOMESHOUSEHOLD MEMBERSHOUSEHOLD SURVEYSHUMAN CAPITALIMPACT OF TRADEIMPACT OF TRADE REFORMSIMPORTIMPORT PROTECTIONIMPORTSINCOMEINCOME COMPONENTSINCOME DISTRIBUTIONINCOME GROUPSINCOME LEVELINCOME LEVELSINCOME SOURCESINCOMESINDIVIDUAL INCOMESINTERNATIONAL TRADELABOR MARKETLABOR MARKET SEGMENTATIONLABOR MARKETSLIVING STANDARDSMARKET IMPERFECTIONSMARKET PRICESMARKET REFORMSMARKET SEGMENTATIONMETAL PRODUCTSNEGATIVE EXTERNALITIESNEGATIVE SHOCKNEGATIVE SIGNPOLICY REFORMPOLICY REFORMSPOLICY RESEARCHPOOR HOUSEHOLDSPOOR PEOPLEPOSITIVE EXTERNALITIESPOVERTY IMPACTPOVERTY REDUCTIONSPREFERENTIAL MARKET ACCESSPRICE CHANGESPRICE DECREASESPRICE INCENTIVESPRIMARY FACTORSPRIVATE CONSUMPTIONPRODUCTIVE ASSETSREAL EXCHANGE RATEREAL EXCHANGE RATESREAL INCOMEREGIONAL TRADEREGIONAL TRADE PACTSREGRESSION ANALYSISRELATIVE CHANGERELATIVE IMPORTANCERELATIVE PRICESRESOURCE ALLOCATIONRULES OF ORIGINSALESSENSITIVITY ANALYSISSKILLED WORKERSSOUTH AMERICASUBSTITUTESSURPLUSTARIFF DATATARIFF RATESTARIFF REDUCTIONSTARIFF REVENUETOTAL CONSUMPTIONTOTAL OUTPUTTRADE AGREEMENTTRADE AGREEMENTSTRADE LIBERALIZATIONTRADE PARTNERSTRADE POLICYTRADE REFORMTRADE REFORMSTRADE SHOCKSUNILATERAL LIBERALIZATIONUNILATERAL TRADEUNILATERAL TRADE LIBERALIZATIONUNSKILLED LABORUTILITY FUNCTIONVALUE ADDEDWAGE DIFFERENTIALSWAGE RATEWAGESWORLD PRICESWTOWorld Bank10.1596/1813-9450-3850