Trade Liberalization and the Dynamics of Poverty in Tunisia : A Layered CGE Microsimulation Analysis

The effects of trade liberalization on poverty in Tunisia are examined, using a layered dynamic CGE-microsimulation approach. A dynamic CGE model endogenously generates the evolution of prices, as well as income paths under protection and freer trade assumptions for each household group. These results are then used to assess the change in real income of each household, using a sample from the 1995 household survey, and thus the effects of the simulated changes on poverty. Dominance tests are also used to avoid the arbitrariness of choosing a poverty line and a poverty measure. Simulation results show that trade openness slows down the poverty reduction in the short run, but enhances it in the long-run