Selim Raihan

Implications of WTO Agreements and Unilateral Trade Policy Reforms for Poverty in Bangladesh: Short Versus Long-Run Impacts

The authors examine the effects of WTO agreements and domestic trade policy reforms on production, welfare, and poverty in Bangladesh. They use a sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, allowing for long-run analysis. The study is based on the 2000 Social Accounting Matrix (SAM) of Bangladesh including 15 production sectors, four factors of production (skilled and unskilled labor, agricultural and nonagricultural capital), and nine household groups (five in rural areas and four in urban areas). To examine the link between the macroeconomic effects and microeconomic effects in terms of poverty, the authors use the representative household approach with actual intra-group income distributions. The study presents five simulations for which the major findings are: (1) The Doha scenario has negative implications for the overall macroeconomy, household welfare, and poverty in Bangladesh. Terms of trade deteriorate and consumer prices, particularly food prices, increase more than nominal incomes, especially among poor households. (2) Free world trade has similar, but larger, impacts. (3) Domestic trade liberalization induces an expansion of agricultural and light manufacturing sectors, favorable changes in the domestic terms of trade. Although the short-run welfare and poverty impacts are negative, these turn positive in the long run when capital has adjusted through new investments. Rising unskilled wage rates make the poorest households the biggest winners in terms of welfare and poverty reduction. (4) Domestic liberalization effects far outweigh those of free world trade when these scenarios are combined. (5) Remittances constitute a powerful poverty-reducing tool given their greater importance in the income of the poor.

Remittances and Household Welfare: A Case Study of Bangladesh

This paper examines the impacts of international remittances on household consumption expenditure and poverty in Bangladesh using computable general equilibrium modeling of the Bangladesh economy and microeconometric analysis at the household level. The former assesses the economic effects and distributional implications of remittances at the macro, sectoral, and household group levels, while the latter shows the association between remittances and household consumption expenditure, including poverty status. The first results show that remittances have positive effects on the economy and reduce poverty. It is estimated that 1.7 out of the 9 percentage point reduction in the headcount ratio during 2000–2005 was due to the growth in remittances. A closer look at the household level further reveals the positive and significant impacts of remittances on the household’s food and housing-related expenditures. The impacts on education and health expenditures are also positive but insignificant. Moreover, the logit regression results suggest that the probability of the household becoming poor decreases by 5.9% if it receives remittances, which further confirms the positive impact of remittances. Given that migration and remittances also bring costs to the society, the study findings call for policies to maximize their benefits. This includes attracting more remittances through formal channels and increasing their productive use.

Welfare and Poverty Impacts of Tariff Reforms in Bangladesh:A General Equilibrium Approach

Our study assesses the impacts of different policy reforms, such as domestic trade liberalisation, implementation of WTO agreements in the textile sector and WTO negotiations on the movement of natural persons, and examines their welfare and poverty implications at the household level in the economy of Bangladesh. We use a comparative static computable general equilibrium (CGE) model based on the 1995-96 Social Accounting Matrix (SAM) of the Bangladesh economy. This study carries out three simulations. The first simulation entails full liberalisation of tariffs and the resultant reduction in government revenues are mobilised by enhancing the existing production taxes and imposing new taxes on construction sector; in the second simulation, export of ready-made garments (RMG) are reduced by 25 percent; and in the third simulation the remittances are increased by 50 percent. Equivalent variations (EVs) and Foster-Greer-Thorbecke (FGT) measures are applied to estimate welfare and poverty changes respectively. The prime observation is that rural poverty, as measured by the head count ratio, is observed to increase under all three simulations. The gap and severity of the rural poor have also worsened in all three simulations indicating worse poverty profiles for the rural poor compared to the base-run scenario. Urban head count poverty has also deteriorated in the first and second simulations, while has improved only in the third simulation. The gap and severity of poverty for the urban population have, however, deteriorated in all three simulations.

Implications of Wto Agreements and Domestic Trade Policy Reforms for Poverty in Bangladesh: Short Vs' Long Run

We examine the impacts of WTO agreements and domestic trade policy reforms on production, welfare and poverty in Bangladesh. A sequential dynamic computable general equilibrium (CGE) model, which takes into account accumulation effects, is used allowing for long run analysis. The study is based on 2000 SAM of Bangladesh including fifteen production sectors, four factors of production (skilled and unskilled labour, agricultural and non-agricultural capital) and mine household groups (five in rural areas and four in urban areas) based on the year 2000 household survey. To examine the link between the macro effects and micro effects in terms of poverty we use the representative household approach with actual intra-group income distributions. The study presents five simulations for which the major findings are: (1) the Doha scenario has negative implications for the overall macro economy, household welfare and poverty in Bangladesh. Terms of trade deteriorate and consumer prices, particularly food prices, increase more than nominal incomes, especially among poor households; (2) Free world trade has similar, but larger, impacts; (3) Domestic trade liberalisation induces an expansion of agricultural and light manufacturing sectors, favourable changes in the domestic terms of trade. Although the short run welfare and poverty impacts are negative, these turn positive in the long run when capital has adjusted through new investments. Rising unskilled wage rates make the poorest household the biggest winners in terms of welfare and poverty reduction; (4) Domestic liberalisation effects far outweigh those of free world trade when these scenarios are combined; (5) Remittances constitute a powerful poverty-reducing tool given their greater importance in the income of the poor.

What Does MFN Trade Mean for India and Pakistan? Can MFN be a Panacea?

India and Pakistan, the two largest economies in South Asia, share a common border, culture and history. Despite the benefits of proximity, the two neighbors have barely traded with each other. In 2011, trade with Pakistan accounted for less than half a percent of Indias total trade, whereas Pakistans trade with India was 5.4 percent of its total trade. However, the recent thaw in India-Pakistan trade relations could signal a change. Pakistan has agreed to grant most favored nation status to India. India has already granted most favored nation status to Pakistan. What will be the gains from trade for the two countries? Will they be inclusive? Is most favored nation status a panacea? Should the granting of most favored nation status be accompanied by improvements in trade facilitation, infrastructure, connectivity, and logistics to reap the true benefits of trade and to promote shared prosperity? This paper attempts to answer these questions. It examines alternative scenarios on the gains from trade and it finds that what makes most favored nation status work is the trade facilitation that surrounds it. The results of the general equilibrium simulation indicate Pakistans most favored nation status to India would generate larger benefits if it were supported by improved connectivity and trade facilitation measures. In other words, gains from trade would be small in the absence of improved connectivity and trade facilitation. The idea of trade facilitation is simple: implement measures to reduce the cost of trading across borders by improving infrastructure, institutions, services, policies, procedures, and market-oriented regulatory systems. The returns can be huge, even with modest resources and limited capacity. The dividends of trade facilitation can be shared by all.

Unlocking Bangladesh-India trade : emerging potential and the way forward

The primary objective of this study is to analyze the impact on Bangladesh of increased market access in India, both within a static production structure and also identifying dynamic gains. The study shows that Bangladesh and India would both gain by opening up their markets to each other. Indian investments in Bangladesh will be very important for the latter to ramp up its exports, including products that would broaden trade complementarity and enhance intra-industry trade, and improve its trade standards and trade-handling capacity. A bilateral Free Trade Agreement would lift Bangladeshs exports to India by 182 percent, and nearly 300 percent if transaction costs were also reduced through improved connectivity. These numbers, based on existing trade patterns, represent a lower bound of the potential increase in Bangladeshs exports arising from a Free Trade Agreement. A Free Trade Agreement would also raise Indias exports to Bangladesh. Indias provision of duty-free access for all Bangladeshi products (already done) could increase the latters exports to India by 134 percent. In helping Bangladeshs economy to grow, India would stimulate economic activity in its own eastern and north-eastern states. Challenges exist, however, including non-tariff measures/barriers in both countries, excessive bureaucracy, weak trade facilitation, and customs inefficiencies. Trade in education and health care services offers valuable prospects, but also suffers from market access issues. To enable larger gains, Bangladesh-India cooperation should go beyond goods trade and include investment, finance, services trade, trade facilitation, and technology transfer, and be placed within the context of regional cooperation.

South Asian Economic Union Challenges and Tasks Ahead

The path to the South Asian Economic Union (SAEU) will have its own route, based on the contexts prevail in South Asia. The major challenges to move towards SAEU include a reduction in the sensitive list, removal of Non-Tariff Barriers (NTBs), effective and faster implementation of the South Asian Agreement on Trade in Services (SATIS), effective regional investment cooperation, promotion of trade facilitation measures, promotion of regional value chains, cross-border energy cooperation, dealing with informal trade and strengthening institutions. South Asia is at the verge of a new regime of regional integration which has to involve integration in trade in goods and services, integration in economic growth processes, promotion of regional investment and trade nexus, and harmonization of economic and trade policies.

Modelling Gender Impacts of Policy Reforms in Bangladesh: A Study in a Sequential Dynamic CGE Framework

The research explores the gender aspects of policy reforms in Bangladesh in a sequential dynamic computational general equilibrium (CGE) framework. This research uses the most updated SAM of Bangladesh and is the first attempt to build a gendered sequential dynamic CGE model for the Bangladesh economy. A ‘home production’ version of the gendered CGE model for the Bangladesh economy is developed. The study tries to understand how gender interests are affected by greater exposure to trade and other policy reforms. The short-run and long-run impacts of policy reforms in the labour market and in the household in a gendered framework are also explored. The research performs two simulations to examine the impact of (1) domestic trade liberalisation in Bangladesh, and (2) the phasing-out of the Multi-Fibre Agreement (MFA) on textile and garments. This research builds a gendered social accounting matrix (SAM) for the year 2000 and uses it in a sequential dynamic computable general equilibrium framework, following the representative household approach. It is found that domestic trade liberalisation leads to a significant expansion of the ready-made garments sector in the economy, which then leads to an increase in the labour market supply share of unskilled female labour. However, this results in a fall in the shares of domestic labour supply and leisure of unskilled female members of the households. The fall in the share of leisure time may have significant negative implications for the time spent on education by this labour category. It is also observed that the long-run impacts are different from the short-run impacts with respect to the magnitude of the effects. In the case of the second simulation, it can be noted that the MFA phase-out works in completely the opposite direction. The share of market labour supply of unskilled female members of the households decreases, and the shares of domestic work and leisure increase for most of the households both in the short and long run.

What Determines the Choice Between Farm and Nonfarm Employments in the Rural Bangladesh

With a small geographic size and huge population, employment generation for all economically active population is a major challenge in Bangladesh. Though agriculture has been the major employment generating sector, the rural economy in Bangladesh has been experiencing a transition over the past two decades. While unpaid family work in the rural areas is still highly farm-based, paid employment is mainly experiencing the transition, shifting more towards the nonfarm activities. World Bank (Summary report. Vol. 1 of Bangladesh—Promoting the rural non-farm sector in Bangladesh, World Bank, Washington, DC, 2004) reported that the rural nonfarm sector in Bangladesh accounted for about 40% of rural employment during early 2000s. Recent labor force surveys reveal some strong evidence of growth in the rural nonfarm economy. The growth of the rural nonfarm sector is very evident, because, with the limited arable land and intensification of the ones that are available reaching its peak, agricultural sector is least likely to absorb the growing rural labor force. With these contexts in frame, the current paper provides an overview of the potential determinants of the nonfarm participation in rural Bangladesh, and makes a systematic analysis of the determinants of employment-switch between farm and nonfarm sectors in rural Bangladesh. In this paper, we use data from the Household Income and Expenditure Surveys (HIES) of Bangladesh Bureau of Statistics (BBS) as the HIES data provides detailed household-level socioeconomic information, which is helpful for such analysis.

How Does Social Protection Affect Labor Force Participation in Bangladesh

Social protection programs in Bangladesh have primarily targeted at reduction of poverty in the country. Various social protection programs address the issues related to basic needs of the people. There are some programs which are directly linked to the recipient of social protection and his or her participation in the labor force. However, experiences from different countries show that different social protection programs, even if they are not directly linked to any employment activities, can have important implications for labor force participation of the individuals of the households under the coverage of any of those programs. In context of labor force participation (LFP), the scenarios for male individuals are different than that of female ones. Over the last few decades, the male labor force participation has been observed well above 80%. Along with the economic growth, female labor force participation has also increased to around 36% in 2010 (Labor Force Survey). However, the growth in female LFP is still very low. The study allows the scope to find the potential for the rise in female LFP in Bangladesh. Increased LFP can have significant implications for economic growth and poverty alleviation. Among different policies, programs and economic activities that can improve female LFP, association with any social protection programs is a significant factor.