Does Agricultural Trade Liberalization Help the Poor in Tunisia? A Dynamic General Equilibrium Approach

Computable General Equilibrium (CGE) models have gained continuously in popularity as an empirical tool for assessing the impact of trade liberalization on growth, poverty and equity. In recent years, there have been attempts to extend the scope of CGE trade models to the analysis of the interaction of agricultural growth, poverty and income distribution. Conventional models ignore however the channels linking technical change in agriculture, trade openness and poverty. This study seeks to incorporate econometric evidence of these linkages into a dynamic sequential CGE model, to estimate the impact of alternative trade liberalization scenarios on welfare, poverty and equity. The analysis uses the latent class stochastic frontier model in investigating the influence of international trade on agricultural technological change and productivity. The estimated productivity gains induced from a more opened trade regime are combined with a general equilibrium analysis of trade liberalization to evaluate the direct welfare benefits of poor farmers and the indirect income and prices outcomes. These effects are then used to infer the impact on poverty using the traditional top-down approach and the Tunisian household survey.