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Households heterogeneity in a global CGE model: an illustration with the MIRAGE poverty module

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  • Bouët, Antoine
  • Estrades, Carmen
  • Laborde, David

Abstract

The objective of this paper is to develop a version of the MIRAGE model of the world economy which includes households heterogeneity in order to studying the impact of trade liberalization on real income and welfare at the household level. In five developing countries, the model disaggregates the representative household into up to 80 households by country, characterized by exogenous criteria like geographic place of residence, qualification and gender of the household’s head, (private vs. public or agriculture vs. industry vs. services) sector of activity,... 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. 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 illustrate the development of this poverty module of the MIRAGE model by studying the impact of full trade liberalization on these households. This study tends to conclude that: (i) while the impact of full trade liberalization may be small at the macroeconomic level, the effect on households’ real income may be quite substantial at the household level with a great heterogeneity in terms of results; (ii) the major channel of transmission of trade liberalization on households’ real income is productive factors’ remuneration while the impact through consumption prices of commodities is limited; (iii) various domestic policies simultaneously implemented to trade liberalization like modification of public transfers to households or changes in income taxation may drastically change the picture and offer compensation for negative effects of this shock or amplify direct impact of full trade liberalization.

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  • Bouët, Antoine & Estrades, Carmen & Laborde, David, 2011. "Households heterogeneity in a global CGE model: an illustration with the MIRAGE poverty module," Conference papers 332034, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332034
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    References listed on IDEAS

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