data:GTAP database; SAM Pakistan 2010-2011 (IFPRI)
design:simulation
method:computable general equilibrium model; MyGTAP model
sample:30
unit:region
representativeness:national
causal:1# 0 correlation / 1 causal
theory:
limitations:generalizability might be reduced due to production factor reallocations specific to the rural poor context of Pakistan
observation:
- intervention:trade liberalization
institutional:1
structural:1
agency:0
inequality:income; spatial
type:0# 0 vertical / 1 horizontal
indicator:1# 0 absolute / 1 relative
measures:Gini coeff
findings:mixed results for free-trade agreements (some Large TA negative correlation w Gini, some regional/bilateral also); impact of trade liberalization depends on micro-economic factors; greater mobility dissipates short-term effects; long-term some increase in income equality
channels:increases in income of poor rural agricultural farm households dependent on grain (with largest export grain rising under most FTA, livestock falling); equity increases through increased wages of farm workers, when this did not happen generally equity decrease; wage compression effects
direction:0# -1 neg / 0 none / 1 pos
significance:0# 0 nsg / 1 msg / 2 sg
notes:
annotation:|
A simulation study on the effects of trade liberalization through FTA on income inequality in Pakistan between different households, measured through the Gini coefficient.
It finds that there is no clear general direction for changes through FTA visible, with its impact primarily depending on micro-economic factors.
Some large trade agreements are negatively correlated with the Gini while others are positively related, similar to regional and bilateral agreements.
Gnerally, this is due to increases in the income of poor rural agricultural farm households being dependent on grain (which is the largest export good often rising under FTA), while livestock predominantly owned by poor rural households decreases in returns under FTA.
The deciding channel can then be increases on the wages of farm workers (after among others grain export increases) increasing income equity, which, when they do not happen, can in turn lead to an overall decrease.
Lastly, there are wage compression effects between urban and rural households, with richer urban households often decreasing processed food or service production.
A greater mobility would dissipate all short-term gains and losses, as changes would get more evenly distributed across regions and households, while over the long term some positive aspects on income equality are visible if increased agricultural growth can be sustained.
The study may have some limits to its generalizability due to the production factor reallocations for agricultural households being specific to the rural poor context in Pakistan.
