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South Africa Trade Liberalization and Poverty in a Dynamic Microsimulation CGE Model

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  • Mabugu, Ramos
  • Chitiga, Margaret

Abstract

South Africa has undergone significant trade liberalization since the end of apartheid. Average protection has fallen while openness has increased. However, economic growth has been insufficient to make inroads into the high unemployment levels. Poverty levels have also risen. The country’s experience presents an interesting challenge for many economists that argue that trade liberalization is pro-poor and pro-growth. This study investigates the short and long term effects of trade liberalization using a dynamic microsimulation computable general equilibrium approach. Trade liberalization has been simulated by a complete removal of all tariffs on imported goods and services, and by a combination of tariff removal and an increase of total factor productivity. The main findings are that a complete tariff removal on imports has negative welfare and poverty reduction impacts in the short run which turns positive in the long term due to the accumulation effects. When the tariff removal simulation is combined with an increase of total factor productivity, the short and long run effects are both positive in terms of welfare and poverty reduction. The mining sector (highest export orientation) is the biggest winner from the reforms while the textiles sector (highest initial tariff rate) is the biggest loser. African and Colored households gain the most in terms of welfare and numbers being pulled out of absolute poverty by trade liberalization.

Suggested Citation

  • Mabugu, Ramos & Chitiga, Margaret, 2007. "South Africa Trade Liberalization and Poverty in a Dynamic Microsimulation CGE Model," Conference papers 331607, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:331607
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    References listed on IDEAS

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    Cited by:

    1. Ole Boysen & Alan Matthews, 2008. "The Impact of Developed Country Agricultural Trade Liberalization on Poverty: A Survey," Working Papers hal-03416399, HAL.
    2. Syed Shoyeb Hossain & Huang Delin, 2022. "Measuring economic impact in Korea, Japan, India, China, and ASEAN considering agricultural sectors: a dynamic CGE approach based on GAMS," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(2), pages 571-613, May.
    3. Augustine Adebayo Kutu & Abieyuwa Ohonba, 2024. "The Impact of Trade Liberalization on Economic Growth in South Africa," International Journal of Economics and Financial Issues, Econjournals, vol. 14(6), pages 55-63, October.
    4. Ikechukwu D. Nwaka & Stephen T. Onifade, 2015. "Government Size, Openness and Income Risk Nexus: New Evidence from Some African Countries," Research Africa Network Working Papers 15/056, Research Africa Network (RAN).
    5. Acharya, Sanjaya, 2011. "Making unilateral trade liberalisation beneficial to the poor," Socio-Economic Planning Sciences, Elsevier, vol. 45(2), pages 60-71, June.
    6. Filipski, Mateusz & Edward Taylor, J. & Msangi, Siwa, 2011. "Effects of Free Trade on Women and Immigrants: CAFTA and the Rural Dominican Republic," World Development, Elsevier, vol. 39(10), pages 1862-1877.
    7. Ikechukwu D. NWAKA & Stephen T. ONIFADE, 2015. "Government Size, Openness and Income Risk Nexus: New Evidence from Some African Countries," Working Papers of the African Governance and Development Institute. 15/056, African Governance and Development Institute..

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    More about this item

    Keywords

    International Relations/Trade; Food Security and Poverty;

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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