Volume 9, Issue 1, June 2020, Page: 10-19
Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach
Mohammad Mahbubur Rahman, School of Health Sciences and Social Works, University of Portsmouth, UK
Cheng Fang, Food and Agriculture Organization of the United Nations, Rome, Italy
Received: Oct. 3, 2019;       Accepted: Nov. 12, 2019;       Published: Jan. 6, 2020
DOI: 10.11648/j.jwer.20200901.12      View  402      Downloads  161
Abstract
Using a partial equilibrium model, we examine the effects of full tariffs withdrawal from food imports of Bangladesh on its poverty and inequality. We show that if tariffs are withdrawn from food imports, domestic food prices decrease, but the sizes of decreases in prices depend on import demand elasticities. Then we show that decreases in domestic prices affect households’ welfare or income in three channels. As consumers of food items, households gain real income/welfare as their food expenditures reduce. As laborers in the agriculture or food processing sector, households’ members may lose their income, as according to the Stolper-Samuelson theorem, changes in output prices may affect input prices positively. As sellers of food items, households lose their income. From Household Income and Expenditure Survey 2010, we find that the average effect of full tariffs withdrawal from food imports on households’ welfare is positive, as all households are consumers, but all are not laborers and sellers. So, the first channel is stronger than other channels. We have found that food trade liberalization reduces the poverty rate by 2.4 percentage points. However, the main food in Bangladesh is rice, which had no import tariff in our data period. We also produce results for rice trade liberalization. If the rice tariff were the highest ever (e.g., 19.4%) and the government reduced it to zero, the poverty rate would have decreased by 1.74 percentage points. Rice trade liberalization also reduces inequality, but trade liberalization of other foods does not influence inequality.
Keywords
Trade Liberalization, Poverty, Inequality, Partial Equilibrium
To cite this article
Mohammad Mahbubur Rahman, Cheng Fang, Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach, Journal of World Economic Research. Vol. 9, No. 1, 2020, pp. 10-19. doi: 10.11648/j.jwer.20200901.12
Copyright
Copyright © 2020 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
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