Poverty and Inequality Course: Module 7
April 16-17, 2007
9:00 am - 4:00 pm
Policy impact analysis is essentially an exercise in social evaluation as it involves a comparison of social states on the basis of a criterion stemming from the policy objective. In general, social evaluation is as an assessment of variations in individual and social welfare attributable to an exogenous chock or the implementation of a policy. Economic shocks and policies may have at once macroeconomic, structural and distributional implications working through a number of flow-of-funds variables, and a set of markets. This creates a need for an analytical framework that explicitly accounts for the interdependence between these three dimensions. A general equilibrium model offers such a framework. In addition, it is used to infer the counterfactual state. This module is an introduction to social impact analysis within a general equilibrium framework. The basic approach followed here is to link a social evaluation criterion to a computable general equilibrium (CGE) model describing the fundamental determinants of poverty namely, individual behavior and social interaction. The participants will learn how to build and run a simple CGE model in EViews. They will also learn how to link such a model to a poverty module based on a parameterization of the Lorenz curve. The full simulation model will then be used to illustrate the assessment of the poverty impacts of exogenous shocks (Dutch disease and terms of trade shocks), and changes in budgetary policies. The module ends with a presentation of two case studies of trade reform for China and Morocco.
Course Instructor: B. Essama-Nssah
Course Outline: Evaluating the Poverty Impacts of Economy-Wide Policies (17kb PDF)
Core Reading List
Dinwiddy, C.L. and F. J. Teal (1988). Chapters 1 and 3. In The Two-Sector General Equilibrium Model. A New Approach. Oxford: Phillip Allan/St. Martin’s Press.
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