Trade liberalisation and inequalities in Nepal: A CGE analysis

Jens Holscher, Sanjaya Acharya, Christiano Perugini

Research output: Contribution to journalArticle

Abstract

In this paper we examine the effects of trade liberalisation on inequality in the small developing country of Nepal. We use a Computable General Equilibrium approach applied to a newly developed social accounting matrix, simulating three liberalisation scenarios: (i) import liberalisation; (ii) export liberalisation; and (iii) import and export liberalisations implemented together under different exchange rate regimes. Outcomes reveal that industry reallocation following liberalisation does not respond to classical trade theory expectations about factor intensity and abundance. On the distributive side, liberalisation seems to increase the high-skilled/low-skilled gap and favour rich households relatively more. However, since under fixed exchange rate also the two poorest household groups increase their income levels, liberalisation may also expected to be beneficial for poverty alleviation.
Original languageEnglish
Pages (from-to)2543-2557
Number of pages15
JournalEconomic Modelling
Volume29
Issue number6
Publication statusPublished - 5 Sep 2012

Keywords

  • Trade liberalisation
  • Inequality
  • CGE model
  • Nepal

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    Holscher, J., Acharya, S., & Perugini, C. (2012). Trade liberalisation and inequalities in Nepal: A CGE analysis. Economic Modelling, 29(6), 2543-2557.