Discussion Paper Details

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Title: Pro-poor trade policy in Sub-Saharan Africa

Author(s): Alessandro Nicita, Marcelo Olarreaga and Guido Porto

Publication Date: October 2011

Keyword(s): Poverty, Sub-Saharan Africa, Trade policy and Wage elasticities

Programme Area(s): International Trade and Regional Economics

Abstract: The objective of this paper is to estimate the potential pro-poor bias in the existing structure of protection in six countries in Sub-Saharan Africa (SSA) (i.e., whether it redistributes income from rich to poor households). We also explore the extent to which the barriers faced by SSA exporters to the rest of the world are biased in favor of poor or rich households. To this end, we start with a simple agricultural household production model and propose an extension to include adjustments in labor income associated with changes in unskilled and skilled wages. We then build indicators that capture the differences in welfare changes across income levels associated with the elimination of SSA's own trade protection, as well as trade protection on SSA's export bundle by the rest of the world. Results suggest that SSA's own trade policy is biased in favor of poor households. In contrast, the trade policies of SSA's trading partners tend to be biased in favor of SSA's rich households, especially when ad-valorem equivalents of non tariff measures (NTMs) are taken into account.

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Bibliographic Reference

Nicita, A, Olarreaga, M and Porto, G. 2011. 'Pro-poor trade policy in Sub-Saharan Africa'. London, Centre for Economic Policy Research.