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GTAP Resource #4392

"Analyzing country strategies for structural transformation, poverty eradication and shared prosperity: Method and application"
by Lofgren, Hans and Martin Cicowiez

In order to eradicate extreme poverty and raising the income share of the bottom 40 percent, African countries need to design policies that use international trade to generate jobs and inclusive growth. This paper develops an approach to medium- and long-run analysis that integrates elements of product-space (PS) analysis with CGE modeling. In this pilot study, the approach is applied to a stylized Sub-Saharan country and used to analyze the impact of alternative export market conditions and government policies on growth, sector structure, poverty, and shared prosperity.
The analysis uses a recursive-dynamic CGE model, augmented to incorporate the following PS features: (a) proximity between sectors influences loss in labor effectiveness from reallocation; (b) proximity-weighted learning-by-doing, driven by accumulated production, influences activity TFP; and (c) penetration of export markets may lead to quality upgrading and higher export prices.
Due to the addition of PS features, the database is expanded to include a matrix of global proximities between sectors based on export data for tradable goods sectors and value-added data for other sectors; (b) unit export price data by sector and distance from unit price frontier for top-quality exporters; and (c) econometric estimates of the determination of country-level deviations from average unit export prices. In simulations, selected goods sectors are defined as promising on the basis of scope for labor absorption without productivity losses, and for raising productivity, and export revenue. It is anticipated that policy discrimination (via taxes, subsidies and/or public investment) in favor of promising sectors may have significant positive effects (in terms of growth, poverty reduction, and reduced inequality). Policy discrimination in favor of sectors that lack these characteristics has opposite effects. Such results may be negated by adverse world price changes for promising sectors.

Resource Details (Export Citation) GTAP Keywords
Category: 2014 Conference Paper
Status: Published
By/In: Presented at the 17th Annual Conference on Global Economic Analysis, Dakar, Senegal
Date: 2014
Version: 1
Created: Lofgren, H. (4/11/2014)
Updated: Lofgren, H. (4/11/2014)
Visits: 2,298
- Dynamic modeling
- Economic analysis of poverty
- Economic development
- Economic growth
- Labor market issues
- Technological change
- Africa (Central)
- Africa (East)
- Africa (Southern)
- Africa (West)

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