@article{Khondker:331207,
      recid = {331207},
      author = {Khondker, Bazlul H. and Raihan, Selim},
      title = {Welfare and Poverty Impacts of Policy Reforms in  Bangladesh: A General Equilibrium Approach},
      address = {2004},
      pages = {22},
      year = {2004},
      note = {Presented at the 7th Annual Conference on Global Economic  Analysis, Washington DC, USA},
      abstract = {Our study assesses the impacts of different policy reforms  like domestic trade liberalization, implementation of WTO  agreements in textile sector and WTO negotiations of  service liberalisation like free movement of natural  persons and examines their welfare and poverty implications  for the economy of Bangladesh. We use a comparative static  computable general equilibrium (CGE) model based on 1995-96  Social Accounting Matrix (SAM) of the Bangladesh economy.  The 1995-96 SAM of Bangladesh is characterised by 26  production sectors, 7 factors of production and 7 household  groups. The household groups differ with respect to  employment status, income levels and expenditure patterns.  Since poverty outcomes are manifested and measured at the  household level, we concentrate on how the meso-environment  facing the households, particularly the poor households, is  affected by these policy reforms. The direct effect of  trade liberalization through the price channel depends on  how changes in prices of importable due to tariff changes,  affect the prices faced by households of the imported  commodities and get transmitted to other commodities as  well. On the other hand, implementation of WTO agreements  for textile and apparels (T&A) and thus phasing out of MFA  regime from 2005 will likely to affect the prices of T&A in  the international market and, therefore, may affect the  volume of export of Bangladesh ready-made garments (RMG),  which may have important impact on poverty and welfare of  the households in Bangladesh. Finally, if free movements of  natural persons are allowed, which is an agenda for many  developing countries under the WTO negotiations, it may  raise the remittances for the Bangladesh economy  significantly, which may have important poverty and welfare  implications. Our study carries out three simulations to  examine the welfare and poverty impacts of policy reforms  on the 7 representative household groups. Equivalent  variations (EVs) and FGT measures are applied to estimate  welfare and poverty changes respectively. The first  simulation entail full liberalisation of tariffs and  resultant reduction in government revenues are mobilized by  enhancing (i.e. by 55 percent) the existing production  taxes and imposing new taxes on construction sector such  that pre-simulation budgetary position of the government is  retained; in the second simulation export of RMG is reduced  by 25 per cent; and in the third simulation the remittances  are increased by 50 per cent. The summary of the simulation  outcomes is as follows: (1) In the first simulation, it is  observed that, EVs are negative for all household groups.  The values of the EVs of rural households envisage  relatively larger losses for the well-off groups (e.g.  large farmer and non-farm) compared to the poor household  groups (e.g. labour and small farmer). The pattern is  however reverse in the case of urban group with the EV of  poor household group (i.e. worker low skilled) fell more  than that of urban rich household groups (e.g.  medium-skilled and professional). It also appears that  welfare losses are larger for rural household groups  compared to their urban counter parts. In the first  simulation, poverty status of all household groups has  deteriorated. The loss, however, is marginally higher for  the urban households compared with the households who  reside in the rural location. (2) In the second simulation  (fall in export of RMG by 25 per cent), interestingly  though incomes of all households decline, equivalent  variations and consumption growth of all households  increase indicating improvements in welfare. This result  may seem to be counter-intuitive. The possible explanation  behind such result may be the fact that in our static CGE  setting due to the fall in export of RMG, there is an  increase in the domestic supply, which results in fall in  the domestic prices of goods. This fall in prices may be  higher than the fall in income, which results in increase  in real income. However, this improvement may not sustain  in the long-run. There are improvements in poverty profiles  for the rural households, and, except for the head-count  poverty measure, the gap and severity of urban poverty  increase. (3) In the third simulation, a 50 per cent  increase in remittances raises welfare for all the  household groups and the welfare improvement is higher for  urban professional household, rural large-farm and non-farm  households. On the other hand, the poverty profiles of the  rural households deteriorate, and though there is an  improvement in urban head-count index the gap and severity  of urban poverty increase.},
      url = {http://ageconsearch.umn.edu/record/331207},
}