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Citation Information

Type Working Paper
Title Cooperation vs. non cooperation in the multilateral trading system: the impact on poverty and inequality in developing countries
Publication (Day/Month/Year) 2012
URL https://jgea.org/resources/download/5815.pdf
The objective of this paper is to use the new version of MIRAGE, MIRAGE-HH
(MIRAGE Households), to evaluate the potential impact of the Doha Development
Agenda and a protectionist scenario on households’ welfare, poverty and inequality in
developing countries. MIRAGE-HH is a version of the MIRAGE model of the world
economy which includes households heterogeneity in order to studying the impact of
trade reforms on real income and welfare at the household level. In six developing
countries (Brazil, Indonesia, Pakistan, Tanzania, Uruguay and Vietnam), the model
disaggregates the representative household into up to 124 households by country. The
sources of income and consumption structure reflect disaggregated statistical information
coming from households’ surveys. The new model better captures the behavior of
the public agent in terms of revenues collected and in terms of expenditures. Various
public sector closures are available. Inter-households private transfers are endogenized
according to a "pure altruism" assumption (Lucas and Stark, 1985). This new version
of MIRAGE allows studying the impact of various policy shocks and identifying which
households are expected to win, which households are expected to lose and why, while
taking into account the reaction of households to these shocks in an integrated and
consistent framework. We study two contrasting scenarios, one cooperative scenario
that is close to what could be the Doha Development Agenda, and one non-cooperative
scenario which consists in the implementation of moderate protectionism worldwide.
We calculate the impact of both trade reforms (cooperation vs non cooperation) on the
real income of 87-124 households in Brazil, Indonesia, Pakistan, Tanzania, Uruguay
and Vietnam, and also calculate the impact on poverty and inequality by computing
the well-known FGT poverty indicators (poverty headcount, poverty gap and poverty
severity) and the Gini and Theil indicators concerning income distribution.

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