Agricultural trade liberalization, productivity growth and poverty alleviation: a general equilibrium analysis

Computable General Equilibrium (CGE) models have gained continuously in popularity as an empirical tool for assessing the impact of trade liberalization on 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 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 (LCSFM) and the metafrontier function to investigate the influence of trade openness on agricultural technological change. The estimated productivity gains induced from higher levels of trade 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. The model is applied to Tunisian data using the social accounting matrix of 2001 and the 2000 household expenditures surveys.