Working Paper: CEPR ID: DP8594
Authors: Alessandro Nicita; Marcelo Olarreaga; Guido Porto
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.
Keywords: poverty; sub-saharan africa; trade policy; wage elasticities
JEL Codes: F13; F16
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Elimination of SSA's trade protection (F13) | Increase in unskilled wages (F66) |
| Elimination of SSA's trade protection (F13) | Decrease in skilled wages (F66) |
| Removal of protection by the rest of the world (F52) | Larger gains for poor households than for rich households (H31) |
| Trade policies of SSA's trading partners (F13) | Biased in favor of rich households (H31) |
| Stolper-Samuelson predictions (F16) | Favor unskilled labor in SSA (F66) |