World Trade Organization (WTO) accession produces tangible benefits but also
has costs, especially for transitional economies and Least Developed Countries
(LDC) like Laos. Despite the benefits and costs of WTO accession, there are
very few quantitative studies on Laos? accession to the WTO. Therefore, the
main objective of this paper is to attempt to quantify the economy-wide impact
and poverty of Laos? WTO accession. We employ a standard GTAP model for
this analysis. The simulation results show that Laos will gain from accession to
the WTO, but these gains are quite small. The real GDP will increase about 0.5%
and welfare (equivalent variation) will increase by about US$ 8 million. On the
other hand, the trade deficit will increase and output in some sectors will be
reduced. Therefore, it is difficult to conclude that Laos will gains benefits from
WTO accession. The micro-simulation using the household survey indicates that
the change in household welfare due to the tariff reduction is heterogeneous.
The winners from the tariff reduction are households which live in Vientiane
capital, and are the non-poor in the urban area. The losers from this policy
change are the households which do not belong to the above categories, and
their household income drops and their poverty rates increase slightly. The policy
implication is that social safety nets for the possible losers are necessary in the
future when the trade liberalization policy is implemented. Since this study
focuses only the impact of the tariff reduction, the obtained impact might underor
over-estimate all of the impact of the WTO accession.