Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach

Mohammad Mahbubur Rahman; Cheng Fang

doi:doi:10.11648/j.jwer.20200901.12

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Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach

Mohammad Mahbubur Rahman, Cheng Fang

Published in Journal of World Economic Research (Volume 9, Issue 1)

Received: 3 October 2019 Accepted: 12 November 2019 Published: 6 January 2020

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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 We show that if tariffs are withdrawn from food imports, domestic food prices decrease, but the sizes of decreases in prices depend on import demand elasticities.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.

Published in	Journal of World Economic Research (Volume 9, Issue 1)
DOI	10.11648/j.jwer.20200901.12
Page(s)	10-19
Creative Commons	This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.
Copyright	Copyright © The Author(s), 2020. Published by Science Publishing Group

Keywords

Trade Liberalization, Poverty, Inequality, Partial Equilibrium

References

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Mohammad Mahbubur Rahman, Cheng Fang. (2020). Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach. Journal of World Economic Research, 9(1), 10-19. https://doi.org/10.11648/j.jwer.20200901.12

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Mohammad Mahbubur Rahman; Cheng Fang. Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach. J. World Econ. Res. 2020, 9(1), 10-19. doi: 10.11648/j.jwer.20200901.12

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Mohammad Mahbubur Rahman, Cheng Fang. Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach. J World Econ Res. 2020;9(1):10-19. doi: 10.11648/j.jwer.20200901.12

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@article{10.11648/j.jwer.20200901.12,
  author = {Mohammad Mahbubur Rahman and Cheng Fang},
  title = {Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach},
  journal = {Journal of World Economic Research},
  volume = {9},
  number = {1},
  pages = {10-19},
  doi = {10.11648/j.jwer.20200901.12},
  url = {https://doi.org/10.11648/j.jwer.20200901.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20200901.12},
  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.},
 year = {2020}
}

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TY - JOUR
T1 - Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach
AU - Mohammad Mahbubur Rahman
AU - Cheng Fang
Y1 - 2020/01/06
PY - 2020
N1 - https://doi.org/10.11648/j.jwer.20200901.12
DO - 10.11648/j.jwer.20200901.12
T2 - Journal of World Economic Research
JF - Journal of World Economic Research
JO - Journal of World Economic Research
SP - 10
EP - 19
PB - Science Publishing Group
SN - 2328-7748
UR - https://doi.org/10.11648/j.jwer.20200901.12
AB - 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.
VL - 9
IS - 1
ER -

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Author Information

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

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APA Style

Mohammad Mahbubur Rahman, Cheng Fang. (2020). Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach. Journal of World Economic Research, 9(1), 10-19. https://doi.org/10.11648/j.jwer.20200901.12

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ACS Style

Mohammad Mahbubur Rahman; Cheng Fang. Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach. J. World Econ. Res. 2020, 9(1), 10-19. doi: 10.11648/j.jwer.20200901.12

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AMA Style

Mohammad Mahbubur Rahman, Cheng Fang. Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach. J World Econ Res. 2020;9(1):10-19. doi: 10.11648/j.jwer.20200901.12

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@article{10.11648/j.jwer.20200901.12,
  author = {Mohammad Mahbubur Rahman and Cheng Fang},
  title = {Effects of Food Trade Liberalization on Poverty and Inequality in Bangladesh: A Partial Equilibrium Approach},
  journal = {Journal of World Economic Research},
  volume = {9},
  number = {1},
  pages = {10-19},
  doi = {10.11648/j.jwer.20200901.12},
  url = {https://doi.org/10.11648/j.jwer.20200901.12},
  eprint = {https://article.sciencepublishinggroup.com/pdf/10.11648.j.jwer.20200901.12},
  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.},
 year = {2020}
}

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