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Aid for Trade Policy in Developing and Least Developed Countries: A GTAP Simulation Analysis

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  • Berrittella, Maria
  • Zhang, Jian

Abstract

Recent global initiatives on debt relief and development assistance call for increasing aid for trade to the poorest countries. We apply a multi-country computable general equilibrium model, to analyze if aid for trade offers the possibility that, instead of the developing and least developed countries’ being worse off—as so many were as the result of the last round of trade negotiations—they will actually be better off. Alternative aid for trade scenarios have been evaluated in terms of effectiveness and equity. Our findings show that aid for trade policies expand trade and alleviate inequalities. The developing and least developed countries will benefit mainly from aid for trade assistance that helps these countries with any transitional adjustment costs from liberalization and increases factor productivity. Effectiveness of aid for trade is enforced if income transfers from donors are fairly divided amongst the recipient countries.

Suggested Citation

  • Berrittella, Maria & Zhang, Jian, 2011. "Aid for Trade Policy in Developing and Least Developed Countries: A GTAP Simulation Analysis," Conference papers 332073, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    • Handle: RePEc:ags:pugtwp:332073
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    References listed on IDEAS

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    1. L. ALAN WINTERS & NEIL McCULLOCH & ANDREW McKAY, 2015. "Trade Liberalization and Poverty: The Evidence So Far," World Scientific Book Chapters, in: Non-Tariff Barriers, Regionalism and Poverty Essays in Applied International Trade Analysis, chapter 14, pages 271-314, World Scientific Publishing Co. Pte. Ltd..
    2. Reimer, Jeffrey J., 2002. "Estimating the poverty impacts of trade liberalization," Policy Research Working Paper Series 2790, The World Bank.
    3. Decaluwe, B. & Patry, A. & Savard, L. & Thorbecke, E., 1999. "Poverty Analysis Within a General Equilibrium Framework," Cahiers de recherche 9909, Université Laval - Département d'économique.
    4. Reimer, Jeffrey J., 2002. "Estimating the poverty impacts of trade liberalization," Policy Research Working Paper Series 2790, The World Bank.
    5. Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2008. "Assessing Applied Protection across the World," Review of International Economics, Wiley Blackwell, vol. 16(5), pages 850-863, November.
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