International Journal of Business and Social Science

ISSN 2219-1933 (Print), 2219-6021 (Online) DOI: 10.30845/ijbss

Impacts of Trade Liberalization on Growth and Poverty in Ethiopia: Dynamic Computable General Equilibrium Simulation Model
Seid Yimer

To investigate the impacts of trade liberalization in Ethiopia, the paper uses a dynamic Computable General Equilibrium model that allows for quantification of income and welfare effects stemming from tariff reduction. The 1990/2000 Social Accounting Matrix (SAM) is fitted into the model and we simulated alternative policies scenarios depicting full and indiscriminating liberalization, gradual and rationalized liberalization and instantaneous tariff liberalization. The main finding of these scenarios is a decline in poverty among all households in the long run. In the short run, poverty remains significantly unaffected for most of the simulations' scenarios. The simulations' results show that static version of the model underestimates trade liberalization's impacts on production, and welfare, since it excludes the accumulation effects. However, from the alternative simulations' scenarios, instantaneous type of liberalization seems performing well in its capacity to increase real GDP, welfare, real output, and real export in the long run. This liberalization also records substantial decline in poverty level in the long run.

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