Human Capital Formation and the Linkage between Trade and Poverty: The Cases of Costa Rica and Nicaragua

We combine di§erent analytical instruments to assess the impact of human capital and trade policies on macroeconomic aggregates and poverty, and how both sets of policies complement each other in Costa Rica and Nicaragua. We use a top-down approach ñi.e. a dynamic CGE model and microsimulationsñ to assess the e§ects of two FTAs: DR-CAFTA and EU-CAAA on production and poverty. Moreover, we use a human capital satellite model to evaluate the impact of human capital formation. Combining the satellite model with the CGE model and the microsimulations, we construct a rich analytical framework to assess the direct e§ect of each set of policies on poverty and how these policies complement each other. We Önd that human capital policies have a signiÖcant and permanent e§ect on growth and this is associated with poverty reductions. On the other hand, the static e¢ ciency changes associated with trade liberalization have positive but small growth and poverty e§ects.(This abstract was borrowed from another version of this item.)(This abstract was borrowed from another version of this item.)