Simulating the Poverty and Distributional Impact of Economic Shocks and Policies within the PAMS Framework

Most Recent Course
May 15-19, 2006
9:00 am - 5:30 pm

Course Objectives

The international community has declared equity and poverty eradication fundamental goals of development. These objectives also define the metric by which to assess the performance of socioeconomic interventions. Furthermore, effective development policymaking creates a need for reliable methods of assessing effectiveness (ex ante or ex post).  There should be, therefore, an intimate relationship between policymaking and impact analysis. 

The Poverty Analysis Macroeconomic Simulator or PAMS is a flexible simulation tool, member of a class of policy models designed for the analysis of poverty and inequality in a general equilibrium framework. This version of the tool uses EViews as a computing platform and a general equilibrium model to represent the macroeconomy. The basic idea is to link recursively a computable general equilibrium (CGE) model to a poverty and inequality module built upon a parameterization of the Lorenz curve.

The purpose of this course is to provide participants a sound understanding both analytically and empirically of a variety of tools (including PAMS) relevant to the challenges analysts and policymakers face in socioeconomic policy design and evaluation.

By the end of the course, the successful participant will fully grasp:

• The Basic Syntax of EViews 5.1
• The Use of a Probability Model to Assess Impact
• The Logic of General Equilibrium Modeling
• The Numerical Implementation of Two-Sector General Equilibrium Models in EViews
• The Use of PAMS to Simulate  Poverty and distributional Outcomes of Economic Shocks and Policies

Core Modules

Module 1: The Universe of EViews

• Basic Syntax:
  • Object Containers
  • Objects, Views, and Procedures
  • Elements of Programming
• Local Regression
• Propensity Score Matching
• A Brief Demonstration of EViews 5.1
• Exercises on Ex Post Impact Evaluation

Module 2: Building an Applied General Equilibrium Model

• The Logic of General Equilibrium Modeling
• Numerical Implementation in EViews

Module 3: The Poverty and Distributional Outcomes of Shocks and Policies

• A Stylized Framework
• Poverty and Distributional Outcomes of the Dutch Disease
• Exercises:
  • Structural, Poverty and Distributional Impact of Changes in the Terms of Trade
  • Poverty and Distributional Implications of Budgetary Policy

Supplemental Lectures

A series of supplemental lectures will also be given by experts in the field of macro-micro modeling. For example:

• Maquette for MDG Simulations (MAMS)
• Distributional Impacts of Agricultural Growth in Pakistan: A Multiplier Analysis
• Ex-Ante Evaluation of Policy Reforms Using Behavioral Models 
• Early Childhood Development and Integrated Programs: Evidence from the Philippines
• Winners and Losers from Trade Reform: Case Studies for China and Morocco
• Methodological Aspects in Decomposing Changes in the Distribution of Household Incomes
• Micro-Macro Modeling for South Africa

Teaching Approach

The course includes a series of lectures on relevant conceptual and analytical frameworks. These theories are then illustrated through a collection of case studies, which form the basis for hands-on computer sessions. Class participation is very much encouraged.

Team

Instructor and Task Team Leader
B. Essama-Nssah (PRMPR)

Pool of Guest Speakers
Carolina Diaz-Bonilla (DECPG)
Paul Dorosh (SASAR)
Francisco H.G. Ferreira (DECRG)
Delfín S. Go (AFRCE)                         
Elizabeth King (DECRG)
Hans Löfgren (DECPG)
Martin Ravallion (DECRG)

Course Coordinator and Teaching Assistant
Vijdan Korman (PRMPR)

Graphic Design Specialist and Webmaster
Alex Arenas (PRMPR)

Target Audience

Any interested World Bank/IMF staff, in particular, economists and analysts dealing with the issues of poverty and distributional impact of economic policies.

Reference Materials

Course agenda (47kb PDF)

Presentations

• Introduction to the PAMS Course (156kb PDF)
• Module 1:
  • Introduction the Syntax of EViews (260kb PDF)
  • Object Containers in EViews (74kb PDF)
  • Objects, Views and Procedures (147kb PDF)
  • Elements of Programming in Eviews (82kb PDF)
  • Maximum Likelihood Estimation (106kb PDF)
  • The Model Object in EViews (158kb PDF)
  • Propensity Score Matching and Policy Impact Analysis (280kb PDF)
• Module 2:
  • Building an Applied General Equilibrium Model (222kb PDF)
  • The Logic of General Equilibrium Modeling (94kb PDF)
  • A Two-Sector Model of an Open Economy (147kb PDF)
• Module 3:
  • Poverty and Distributional Outcomes of Shocks and Policies (341kb PDF)
  • The Lorenz Model of the Size Distribution of Income (338kb PDF)
  • Linking Poverty Outcomes to Economic Shocks and Policies (123kb PDF)

Core Reading List

1. Essama-Nssah, B. (August 2005). The Poverty and Distributional Impact of Macroeconomic Shocks and Policies: A Review of Modeling Approaches, World Bank Policy Research Working Paper, No. 3682. (438kb PDF)
2. Essama-Nssah, B.(April 2006). Propensity Score Matching and Policy Impact Analysis: A Demonstration in EViews, World Bank Policy Research Working Paper, No. 3877.
3. Essama-Nssah, B.(January 2004). Building and Running General Equilibrium Models in EViews. World Bank Policy Research Working Paper, No. 3197. (261kb PDF)
4. De Melo Jaime and Robinson Sherman (1989). Product Differentiation and the Treatment of Foreign Trade in Computable General Equilibrium Models of Small Economies. Journal of International Economics, 27:47-67. (1.87mb PDF)
5. Devarajan Shantayanan, Jeffrey D. Lewis, and Robinson Sherman (1990). Policy Lessons from Trade-Focused, Two-Sector Models. Journal of Policy Modeling, 12(4):635-657. (2.56mb PDF)
6. Essama-Nssah, B. (December 2005). Simulating the Poverty Impact of Macroeconomic Shocks and Policies, World Bank Policy Research Working Paper.  No. 3788. (330kb PDF)
7. Essama-Nssah, B. (February 2005). Inequality and Poverty Simulations within the Lorenz Framework.  Mimeo (398kb PDF)

Suggested Reading List

Introduction

• Sen Amartya (1989). Chapter 1: The Concept of Development. In Hollis Chenery and T.N. Srinivasan (eds.) Handbook of Development Economics. Vol.1 Amsterdam: Elsevier. 
• Essama-Nssah, B. (August 2005). The Poverty and Distributional Impact of Macroeconomic Shocks and Policies: A Review of Modeling Approaches, World Bank Policy Research Working Paper, No. 3682.

Module 1: The Universe of EViews

• Chapter 2: Demonstration.  EViews 5.1 User’s Guide. Quantitative Micro Software, 2005.
• Chapter 2: Command Basics.  EViews 5.1 Command and Programming Reference, 2005. 
• Chapter 7: Working with Data.   EViews 5.1 User’s Guide. Quantitative Micro Software, 2005.
• Chapter 6. EViews Programming. EViews 5.1 Command and Programming Reference, 2005.
• Chapter 8: Series Links. EViews 5.1 User’s Guide. Quantitative Micro Software, 2005.
• Chapter 21: Discrete and Limited Dependent Variable Models. EViews 5.1 User’s Guide. Quantitative Micro Software, 2005.
• Chapter 22: The Log Likelihood (LogL) object.  EViews 5.1 User’s Guide. Quantitative Micro Software, 2005.
• Essama-Nssah, B.(April 2006). Propensity Score Matching and Policy Impact Analysis: A Demonstration in EViews, World Bank Policy Research Working Paper, No. 3877. 
• Smith Jeffrey A. and Todd Petra E. (2005). Does Matching Overcome LaLonde’s Critique of Non-Experimental Estimators? Journal of Econometrics, 125:305-353.

Module 2: Building an Applied General Equilibrium Model

• Varian Hal R. (1984). Chapter 0: Introduction. In  Microeconomic Analysis. Second ed. New York: W.W Norton Company.
• King, Benjamin B. (1985). Chapter 1: What is SAM? In Graham Pyatt and Jeffery I. Round (eds.) Social Accounting Matrices: A Basis for Planning. A World Bank Symposium.  Washington D.C.: World Bank.
• Robinson Sherman (1989). Chapter 18:  Multisectoral Models. In Hollis Chenery and T.N. Srinivasan (eds.) Handbook of Development Economics. Volume II. Amsterdam: Elsevier. 
• Dorosh Paul, Muhammad Khan Niazi, and Hina Nazli (Autumn 2003). Distributional Impacts of Agricultural Growth in Pakistan: A Multiplier Analysis. The Pakistan Development Review, 42:3  pp.249-275.
• 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.
• Essama-Nssah, B.(January 2004). Building and Running General Equilibrium Models in EViews. World Bank Policy Research Working Paper, No. 3197. 
• De Melo Jaime and Robinson Sherman (1989). Product Differentiation and the Treatment of Foreign Trade in Computable General Equilibrium Models of Small Economies. Journal of International Economics, 27:47-67.
• Devarajan Shantayanan, Jeffrey D. Lewis, and Robinson Sherman (1990). Policy Lessons from Trade-Focused, Two-Sector Models. Journal of Policy Modeling, 12(4):635-657.
• Chapter 26. Models. EViews 5.1 User’s Guide, 2005. Quantitative Micro Software, 2005.

Module 3: Poverty and Distributional Outcomes of Economic Shocks and Policies

• Datt, Gaurav (October 1998).Computational Tools for Poverty Measurement and Analysis. FCND Discussion Paper, No. 50.
• Essama-Nssah, B. (December 2005). Simulating the Poverty Impact of Macroeconomic Shocks and Policies, World Bank Policy Research Working Paper.  No. 3788. 
• Essama-Nssah, B. (February 2005). Inequality and Poverty Simulations within the Lorenz Framework.  Mimeo
• Decaluwe, B., A. Partry, L. Savard And E. Thorbecke, (June 1999). Poverty Analysis within a General Equilibrium Framework.  Working Paper 9909, CREFA99-06.
• Ravallion Martin and Lokshin Michael (August 2004). Gainers and losers from Trade Reform in Morocco. Policy Research Working Paper.  No. 3368. 
• Benjamin, Nancy C., Devarajan Shantayanan, and Weiner Robert J. (1989). The Dutch Disease in a Developing Country: Oil Reserves in Cameroon. Journal of Development Economics, 30: 71-92.
• Varian Hal R. (1994). How to Build an Economic Model in Your Spare Time. Mimeo

• For the PAMS course materials, visit http://www.worldbank.org/pams
• For other PSIA Activities, visit http://www.worldbank.org/psia

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