Multilateral Trade Liberalization and Mexican Households: The Effect of the Doha Development Agenda
32 Pages Posted: 21 Sep 2005
Date Written: August 2005
Empirical evidence suggests that global trade reforms are unlikely to produce analogous results across countries, especially when analyzing their effect on poverty. This implies that the analysis of trade reform on social welfare cannot be generalized and needs to be conducted on a country by country basis. Moreover, even within the same country, geographic areas, households, and individuals are likely to be differentially affected, some of them benefiting more than others, while others might lose. With this in mind, this paper provides a quantitative estimate of the effect on Mexican households from the implementation of the Doha development agenda. The analysis utilizes a twostep approach for which changes in prices and factors are estimated through a CGE model (GTAP) and then mapped into the welfare function of the household using household survey data. The empirical approach used in this study aims to measure the impact of Doha implementation by tracing changes in the household prices of goods and factors and their impact on household welfare, taking particular account the role of domestic price transmission.
The findings suggest that multilateral trade liberalization alone would have a negative effect on Mexican households, even though very small. However, when the implementation of the Doha development agenda is complemented by domestic policies aimed to increase productivity and improve domestic price transmission, the overall effects become positive. The results point to the importance of domestic price transmission in determining the variance of the effects across households.
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