General Equilibrium Approach for Poverty Analysis: With an Application to Cameroon

Decaluwe, B.; Savard, L.; Thorbecke, E.

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Title:	General Equilibrium Approach for Poverty Analysis: With an Application to Cameroon
Authors:	Decaluwe, B. Savard, L. Thorbecke, E.
Year:	2005
Periodical:	African Development Review
Volume:	17
Issue:	2
Period:	September
Pages:	213-243
Language:	English
Geographic term:	Cameroon
Subjects:	household income poverty datum line economic models Economics and Trade Development and Technology
External link:	https://onlinelibrary.wiley.com/doi/10.1111/j.1017-6772.2005.00113.x/pdf
Abstract:	In this paper the authors use a computable general equilibrium model to study the impact of a trade shock and a tariff reform on household poverty for an archetype developing country. In contrast to other studies, the income distribution of each household group is presented as a Beta statistical distribution and the poverty lines are presented as being endogenous. With this specification, the poverty line will change following a variation in relative prices. With the new distributions and poverty line, the poverty levels of the base year are compared with the ex-post values. Foster, Greer and Thorbecke's (1984) poverty measures are used. The authors work with the Cameroon household survey data of 1995-1996. They consider two scenarios. The first is a 30 percent fall in the world price of the country's export crop and the second is a reduction of 50 percent in the country's import tariffs. For the first simulation, results indicate a drop in all household incomes and a decrease in the poverty line. Unilateral trade liberalization also has negative consequences for all household incomes. As in the first simulation, the poverty line decreases with a unilateral trade liberalization. In the trade liberalization simulation, the poverty line effect counters the income effect in most cases analysed. In the other simulation, the poverty line effect attenuates the decrease in the poverty measures. App., bibliogr., notes, ref., sum. [Journal abstract]

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