MPIA-10001 Computable General Equilibrium Micro-Simulation Analysis of the Impact of Trade Policies on Poverty in Zimbabwe
This project aims to evaluate the impact of trade policy shocks on the incidence of poverty and on the distribution of income. Isolating the impact of policy effects has the advantage of enabling researchers and policy makers to know how serious an impact a policy has on income distribution and poverty and thus, will facilitate informed policy making.
Because of the current growing concern about unequal income distribution and poverty in Zimbabwe, and because of the central role being played by trade and external policies in the liberalization process, it is important to establish the direct links among these issues. Trade policies have made up a large part of policy in the nineties and have contributed significantly to changes in growth, employment and ownership of resources. These policies affect terms of trade between agriculture and industry, wages, resource ownership, economic performance and employment within the economy. The main trade policies to be tackled in this paper are terms of trade changes and tariff reforms. The approach used to handle these issues is to include individual data from a national survey directly in a computable general equilibrium model (CGE) according to the principles of micro simulation. The advantage of this approach is that it allows us to break down the contribution of income variations, the poverty line and income distribution in the evolution of the main poverty indicators emanating from trade policy.