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GTAP Resource #2075

"The Doha Development Agenda and Brazil: Distributional Impacts"
by Ferreira-Filho, Joaquim Bento and Mark Horridge

In this paper we extend previous results about how trade integration can affect poverty and income distribution in Brazil. To assess the impacts of a Doha Development Agenda (DDA) scenario on poverty and income distribution in Brazil, a computable general equilibrium model (CGE) of Brazil was used, linked to a micro-simulation (MS) model. This method was proposed by Ferreira Filho and Horridge, and guarantees consistency between both models. The model comprises 112,055 Brazilian households and 263,938 adults, distinguishing 42 activities, 52 commodities, and 27 regions. The Doha round is simulated with the aid of a modified version of the GTAP model, and its impacts upon poverty and income distribution in Brazil analyzed. Results suggest that even a large shock like the one simulated would not greatly reduce poverty in Brazil, although the poorest households benefit most.
The analysis was extended to look more carefully inside agriculture, splitting the households according to their working status (temporary workers, permanent workers, self-employed and employers), as well as according to their land ownership status (land less workers and farmers holding 5 land size farms).
Model results show an increase of 253,066 new jobs in the agricultural activities. Most of it (197,187) would be new jobs creation, or workers coming to agriculture from unemployment, and the other part (55,882 workers) would be a net attraction of jobs from contracting industries. The job creation benefits the poor disproportionately: 57% of the new agricultural workers belong to the first three lowest income classes (78% if only count the previously unemployed are considered). As a result of this job increase, total income increases by 3.3% in agriculture as a whole, and almost half of this increase (1.42%) is due to workers coming from unemployment and getting new jobs in agriculture.
The simulated DDA scenario, which was found to be poverty-reducing in previous work by the authors, is shown to also reduce poverty inside Brazilian agriculture. Despite the regional differences, all the players in agriculture seem to gain from the policy change. There are complex region/product/technology interactions to be taken into account, and no simple pattern emerges from the analysis.
Model results, then, contradict the notion that only landlords would gain from trade liberalization in the DDA agenda, an idea that became somewhat popular recently. The strong agricultural employment effect and the distribution of land ownership must be taken into account for this discussion.

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
Created: Ferreira-Filho, J. (5/1/2006)
Updated: Ferreira-Filho, J. (5/1/2006)
Visits: 3,723
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