Véronique Robichaud

Fiscal Space and Public Spending on Children in Burkina Faso

Despite high growth rates in recent decades, Burkina Faso is still a poor country. The government acknowledges the need for a stronger commitment to reach the Millennium Development Goals (MDGs), particularly regarding the reduction of poverty. At the same time, the Burkinabe budget deficit has grown in recent years in response to various crises which have hit the country. There are strong pressures to rapidly reduce this budget deficit, but there are active concerns about how this will be achieved. The country thus faces difficult choices: how to ensure better living conditions for children, attain the millennium goals and ensure they have a better future in the present budgetary context?To answer this question, three policy interventions were identified: (i) an increase in education spending, (ii) a school fees subsidy and (iii) a cash transfer to households with children under the age of five. The same total amount is injected into the economy in each of the three cases, facilitating comparison between the three scenarios. The discussions also made it possible to identify the three financing mechanisms that appear most realistic: (i) a reduction in subsidies, (ii) an increase in the indirect tax collection rate and (iii) an extension of the timeframe to reduce the public deficit to ten years rather than five.The results indicate that increased public education spending helps raise school participation and pass rates, thus increasing the supply and education level of skilled workers, leading to a reduced incidence and depth of both monetary and caloric poverty.School fees subsidies have more differentiated effects on education: they promote children’s entry into school to a greater degree, but are less effective at inducing them to pursue their studies. Finally, the supply of skilled workers increases slightly, but their average level of education is lower than in the reference scenario. This type of intervention has a beneficial impact on poverty, greater than under increased public education spending.Cash transfers have a limited impact on educational behaviour, and thus on the supply of skilled workers, but substantially reduce the incidence and depth of poverty.The results are qualitatively similar under each financing approach. In sum, if the objective is to achieve improved education and economic performance, the best intervention appears to be to focus on increased public education spending. However, if reducing child poverty is prioritized, it is cash transfers to families that appear more suitable. Regardless of the intervention considered, the most suitable financing mechanism appears to be a temporary increase in the public deficit, because it is accompanied by a smaller negative effect on the quality of life of the most destitute.

The Gender and Poverty Impacts of Trade Liberalization in Senegal

Developing countries are deeply engaged in trade negotiations at the bilateral, regional and international (WTO) levels. As imports, exports and tariff duties all occupy an important part of their economies, far-reaching impacts on production, labor and capital markets, household incomes and, perhaps most importantly, economic growth will indubitably ensue. As men and women occupy very different roles in these economies, particularly in terms of the import and export orientation of the sectors in which they work, they will be affected very differently by these reforms. To anticipate these changes, a dynamic economy-wide model is developed with an application to Senegal. Whereas most similar existing studies consider the comparative static resource reallocation effects of trade reforms, ours is the first to focus on the growth effects (“dynamic gains from trade”), which are thought to be possibly much larger. The trade-productivity link is revealed to be the strongest growth channel, raising GDP by over three percentage points by the end of our 15 year simulation period. Trade liberalization is found to increase the gender wage gap in favor of men, especially among unskilled workers, as men are more active in export-oriented sectors such as cash crops and mining whereas women contribute more to import-competing sectors such as food crops. Furthermore, the ensuing growth effects further widen the over-all gender wage gap, as the productivity gains from increased openness are greatest in female-intensive sectors in which imports rise markedly. Thus, this suggests the need to implement policies aimed at increasing both unskilled and skilled women’s exposure in labor-intensive export industries, which is currently male dominated. A linked microsimulation analysis, based on a survey of Senegalese households, show that trade liberalization reduces poverty in Senegal, particularly in rural areas. While the fall in the relative wages of rural workers would initially lead us to believe that rural households would lose the most from trade liberalization, they are in fact compensated by greater consumer price savings, given that they consume more goods from the initially protected agricultural and agro-industrial sectors.

The Impact of the International Economic Crisis in South Africa

A dynamic computable general equilibrium model based on the PEP standard model developed by Decaluwe et al. (2009) is used to evaluate the impacts of the international crisis on the South African economy. However, we have changed some assumptions in order to better represent South African specificities. A major innovation in this regard is the modelling of unemployment and the influence of labour unions on the labour market. Two scenarios encompassing a severe and moderate recession are run. The effects of the crisis on the economy are really quite harsh, even in the moderate recession scenario, both in the short run and the long run. Indeed, the decrease of world prices combined with the drop of world demand lead to a decrease in production for many sectors with consequent laying off of workers. The impact on institutions is also worrying: agents see their income as well as their savings decreasing. The huge drop in firms’ savings has a dire impact on total investment while the huge negative impact on government accounts of protracted slow global growth imply tight public budgets for some time to come. Thus, some gains made by the government prior to the crisis may have been reversed by the economic crisis. It is apparent from the results that the impact of the crisis will drag into the long run with the situation still below what it would have been in the absence of a crisis until 2015.

Energy Subsidy Reform and Poverty in Arab Countries: A Comparative CGE-Microsimulation Analysis of Egypt and Jordan

This study simulates the macroeconomic and distributive impacts of real proposed (by local policy makers) energy subsidy reforms in Egypt and Jordan. To do that, we develop a dynamic CGE‐microsimulation model that is able to reconcile the general equilibrium effects of the reform and the individual‐ and household‐specific distributive effects. While the nature of the proposed reforms differs in the two countries, the study underscores the need, in both countries, for reform to generate fiscal savings to boost private investment and increase economic growth. It also shows that the reform alone would further exacerbate poverty through increased consumer prices. However, a modest reinvestment of fiscal savings into cash transfers creates a win‐win scenario of reduced poverty without significantly sacrificing the fiscal and growth benefits from the reform. Impacts (prices, growth, fiscal savings, poverty) are greater in Egypt due to the extent of proposed reforms and the fact that a larger share of the energy products concerned are consumed directly by households, while in Jordan the major effects come from the increase in intermediate input costs which generate a fall in the aggregate demand and, so, in labor demand.

The Economy-Wide Impacts of the South African Child Support Grant: A Micro-Simulation-Computable General Equilibrium Analysis

We examine the economy-wide impact of the child support grant (CSG) on the South African economy using a bottom-up/top-down approach. This allows us to estimate the potential effects on households’ welfare and on the economy following a change in the CSG. Three simulations are presented, in simulation 1 the value of the CSG is increased by 20%; in simulation 2 the number of beneficiaries among the eligible children is increased by two million and simulation 3 combines these two. A positive link between the CSG and the probability of participating in the labour market is found. The positive impacts on the labour market, together with the increase in the transfers received by households, results in an increase in their income. Poverty decreases in comparison with the base year for the whole population and for children. Finally, we can conclude that simulation 1 is the most cost effective of the policies.

Trade Policy and Poverty in Benin: A general Equilibrium Analysis

Economic and financial crisis in Benin since 1980s led the government to embark on a process of economic reforms in 1991. These reforms sought to remedy the fiscal and trade imbalances in order to accelerate economic growth. Trade policy reform was given priority. Import bans and quotas were eliminated, import duties abolished and a compensatory tax on commodities sold in the domestic market instituted. This study analyzes the effects of the trade policy reforms using a computable general equilibrium (CGE) model and household survey data. Results show that these reforms are more beneficial to households in urban areas, but contribute to worsening poverty conditions of the most poor in rural areas. If liberalization policies target better strategies aimed at fighting poverty, or at least not deteriorating the situation, they need to be designed in a way that they do not worsen the poverty conditions of the most destitute in society.