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GTAP Resource #1997

"Agriculture-sector policies and poverty in the Philippines: A computable general-equilibrium Analysis"
by Cororaton, Caesar and Erwin Corong

This paper assesses the economy-wide poverty impacts of trade liberalization in the Philippines. By employing a 35-sector CGE micro-simulation model calibrated to Philippine data with 24,797 households, the macroeconomic, sectoral, factor-income, and poverty effects of tariff reduction are analyzed.

Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, the prevalence of cheap, imported inputs reduces the domestic cost of production, benefiting the outward-oriented and import-dependent industrial sector as their output and export increases.

The national poverty-headcount ratio decreases marginally. However, both the poverty gap and severity of poverty worsens. Poverty indices in most urban areas, particularly for the National Capital Region, decrease significantly. In contrast, rural households suffer due to declining returns from agricultural land and labor.

In conclusion, tariff reduction appears to have slightly reduced the poor while increasing the degree of poverty of those who are poor. The simulation results indicate that trade openness has a pro-urban and anti-rural bias. The critical challenge for the country is to capitalize on the gains and to minimize the losses by implementing complementary policies centered on three considerations: (i) increasing value-added utilization and encouraging forward and backward linkages in manufacturing; (ii) fostering competitiveness in agriculture; (iii) instigating programs aimed at correcting inter- and intra-regional imbalances through skills upgrading.

Resource Details (Export Citation) GTAP Keywords
Category: 2006 Conference Paper
Status: Published
By/In: Presented at the 9th Annual Conference on Global Economic Analysis, Addis Ababa, Ethiopia
Date: 2006
Created: Corong, E. (4/27/2006)
Updated: Corong, E. (4/27/2006)
Visits: 3,416
No keywords have been specified.

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