The Impact of MacroEconomic Policies on Poverty and Income Distribution: Macro-Micro Evaluation Techniques and Tools (Equity and development)

A companion to the bestseller, The Impact of Economic Policies on Poverty and Income Distribution, this title deals with theoretical challenges and cutting-edge macro-micro linkage models. The authors compare the predictive and analytical power of various macro-micro linkage techniques using the traditional RHG approach as a benchmark to evaluate standard policies, such as, a typical stabilization package and a typical structural reform policy. Contents......Page 6 Preface......Page 12 Acknowledgments......Page 14 Contributors......Page 16 Abbreviations......Page 18 1 Introduction: Evaluating the Impact of Macroeconomic Policies on Poverty and Income Distribution......Page 20 Part I. Top-Down Approach with Micro Accounting......Page 44 2 Winners and Losers from Trade Reform in Morocco......Page 46 3 Trade Options for Latin America: A Poverty Assessment Using a Top-Down Macro-Micro Modeling Framework......Page 80 Part II. Top-Down Approach with Behavioral Micro Simulations......Page 110 4 Examining the Social Impact of the Indonesian Financial Crisis Using a Macro-Micro Model......Page 112 5 Can the Distributional Impacts of Macroeconomic Shocks Be Predicted? A Comparison of Top-Down Macro-Micro Models with Historical Data for Brazil......Page 138 Part III. Macro-Micro Integrated Techniques......Page 194 6 Distributional Effects of Trade Reform: An Integrated Macro-Micro Model Applied to the Philippines......Page 196 7 Simulating Targeted Policies with Macro Impacts: Poverty Alleviation Policies in Madagascar......Page 232 8 Wealth-Constrained Occupational Choice and the Impact of Financial Reforms on the Distribution of Income and Macro Growth......Page 266 Part IV. Macro Approach with Disaggregated Public Spending......Page 300 9 Aid, Service Delivery, and the Millennium Development Goals in an Economywide Framework......Page 302 10 Conclusion: Remaining Important Issues in Macro-Micro Modeling......Page 336 Index......Page 344 Box 3.1 Consistency Issues......Page 86 Figure 1.1 Schematic Representation of the Top-Down Modeling Approach......Page 31 Figure 2.1 Impacts of Trade Reform Policies on Poverty in Morocco......Page 59 Figure 2.2 Frequency Distributions of Gains and Losses for Trade Policies 1 and 4......Page 61 Figure 2.3 Absolute and Proportionate Gains for Policies 1and 4......Page 62 Figure 2.4 Production and Consumption Decomposition of the Welfare Impacts for Policy 4......Page 63 Figure 2.5 Net Producers of Cereals in the Distribution of Total Consumption per Person in Rural Areas of Morocco......Page 64 Figure 5.1 A Simplified Overview of the Top-Down Macro-Micro Framework......Page 140 Figure 5.2 An Overview of the Main Blocks of the Macro Model......Page 149 Figure 5.3 Comparison between Actually Observed Changes and Experiment 1, Using Representative Household Groups......Page 174 Figure 5.4 Comparison between Actually Observed Changes and Experiment 1, Using Representative Household Groups, and Experiment 2, Using Pure Micro Simulation Model......Page 175 Figure 5.5 Comparison between Actually Observed Changes and Experiment 1, Using Representative Household Groups, Experiment 2, Using Pure Micro Simulation Model, and Experiment 3, Using Full Macro-Micro Linking Model......Page 176 Figure 6.1 Iterative Resolution of the Integrated Multihousehold CGE Model......Page 201 Figure 6.2 Comparative Growth Incidence Curves for Total Population: IMH_FX_w1 versus IMH_FL_w......Page 221 Figure 6.3 Comparative Growth Incidence Curves for Total Population: IMH_FX_w1 versus MSS_FX_w1......Page 224 Figure 7.1 Fully Integrated Macro-Micro Model Structure......Page 242 Figure 7.2 Benefit Incidence of an Agricultural Subsidy under Various Specifications......Page 252 Figure 7.3 Benefit Incidence of a Total Factor Productivity Shock in the Agricultural Sector......Page 253 Figure 8.1 Occupational Choice Map......Page 274 Figure 8.2 Occupational Choice Maps, Socio-Economic Survey Data and Townsend-Thai Data......Page 277 Figure 8.3 Foreign Capital Inflows and Financial Liberalization......Page 281 Figure 8.4 Intermediated Model, Townsend-Thai Data, 1976–96......Page 283 Figure 8.5 Intermediated Model, Socio-Economic Survey Data, 1976–96......Page 284 Figure 8.6 Welfare Comparison, Townsend-Thai Data, 1979......Page 288 Figure 8.7 Welfare Comparison, Socio-Economic Survey Data, 1996......Page 291 Figure 8.8 Access to Capital and Foreign Capital Inflows, Socio-Economic Survey Data and Townsend-Thai Data......Page 293 Figure 9.1 Foreign Aid per Capita......Page 322 Figure 9.2 Real Wages of Labor with Secondary Education......Page 324 Figure 9.3 Present Value of Foreign Aid......Page 325 Figure 9.4 Trade-Offs between Human Development and Poverty Reduction......Page 327 Table 2.1 Predicted Price Changes Due to Agricultural Trade Reform in Morocco......Page 53 Table 2.2 Consumption Shares and Welfare Impacts through Consumption......Page 55 Table 2.3 Percentage Gains from Each Policy: Production Component......Page 56 Table 2.4 Household Impacts of Four Trade Reforms......Page 57 Table 2.5 Mean Gains from Policy 4, by Region......Page 60 Table 2.6 Decomposition of the Impact on Inequality......Page 65 Table 2.7 Summary Statistics on Explanatory Variables in the Regression Analysis......Page 67 Table 2.8 Regression of per Capita Gain/Loss on Selected Household Characteristics......Page 68 Table 2.9 Urban-Rural Split of Regressions for per Capita Gains......Page 70 Table 3.1 LINKAGE Model: Regional and Sectoral Groups......Page 84 Table 3.2 Trade Protection by Origin, Destination, and Sector......Page 89 Table 3.3 Economic Structure for Brazil, Chile, Colombia, and Mexico......Page 93 Table 3.4 Household Incomes by Source, Segment, and Poverty Status......Page 95 Table 3.5 Sectoral Adjustments......Page 97 Table 3.6 Price (Factors, Consumption Aggregates) and Real Income Changes......Page 99 Table 3.7 Initial Poverty Levels and Percentage Changes Resulting from Trade Reforms......Page 101 Table 3.8 Income Elasticity of Poverty Headcount......Page 103 Table 4.1 Evolution of Poverty in Indonesia, 1996–99......Page 126 Table 4.2 Evolution of Occupational Choices and Wages by Segment, 1997–98......Page 127 Table 4.3 Historical Simulation Results......Page 128 Table 4.4 Simulation Results: Macro Aggregates......Page 130 Table 4.5 Simulation Results: Per Capita Income, Inequality, and Poverty Indicators......Page 131 Table 5.1 An Overview of the Three Experiments Conducted......Page 141 Table 5.2 Standard Multipliers of the Macro Model Compared with Other Macro Models......Page 151 Table 5.3 Some Results of the Macro Model, Historical Simulation for 1999......Page 152 Table 5.4 Major Results of the Public Sector and Financial Sector Modules, Historical Simulation for 1999......Page 153 Table 5.5 Aggregate Results from the Macro Model, Occupations......Page 156 Table 5.6 Aggregate Results from the Macro Model, Earnings......Page 159 Table 5.7 Detailed Results from the Top-Down Macro-Micro Models, Occupations by Skill and Sector......Page 167 Table 5.8 Aggregate Results from the Top-Down Macro-Micro Models, Earnings......Page 170 Table 5.9 Paired t Test......Page 177 Table 5A.1 Log Earnings Regression......Page 181 Table 5A.2 Occupational Structure Multinomial Logit Model: Marginal Effects, Rural......Page 183 Table 5A.3 Occupational Structure Multinomial Logit Model: Marginal Effects, Urban......Page 186 Table 6.1 Definition of Model Specification Used......Page 213 Table 6.2 Macro Results......Page 214 Table 6.3 Structural Effects of the Trade Reform, Output (Value Added) Change by Sector......Page 216 Table 6.4 Effects on Poverty (FGT Poverty Indexes) for the Whole Population and by Education Groups......Page 218 Table 6A.1 Labor Supply Model Estimation Results......Page 225 Table 6C.1 Notations......Page 226 Table 7.1 Minimum Yearly Wages, 1990–96......Page 245 Table 7.2 Distribution of Beneficiary Households across Quintiles......Page 246 Table 7.3 Macroeconomic Impact of Alternative Policies......Page 248 Table 7.4 Employment Impact of Alternative Policies......Page 249 Table 7.5 Social Impact of Alternative Policies, General Equilibrium Results......Page 250 Table 7B.1 Results from Estimation and Micro Calibration......Page 257 Table 8.1 Maximum Likelihood Estimation Results......Page 278 Table 8.2 Welfare Gains and Losses, Intermediated and Nonintermediated Economic Wealth Distribution......Page 290 Table 9.1 Determinants of MDG Achievements......Page 310 Table 9.2 Impacts on MDG Indicators......Page 317 Table 9.3 Impacts on Macroeconomic Indicators......Page 318 Table 9.4 Impacts on Government Current Expenditures......Page 319 Table 9.5 Impacts on Government Investment Expenditures......Page 320 Table 9.6 Impacts on Government Revenues......Page 321 Table 9.7 Impacts on Labor and Capital......Page 323 This book assembles methodologies and techniques to evaluate the poverty impact of macroeconomic policies. It takes as a departure point a companion volume, the impact of economic policies on poverty and income distribution: evaluation techniques and tools. This volume was primarily a review of microeconomic techniques aimed at assessing policies that are directly concerned with the welfare of poor households or individuals such as changing the level of cash transfers to the poorest households, increasing price subsidies for basic consumer goods, and the like. In addition, the second part of that earlier publication introduced basic techniques to deal with the poverty impact of macroeconomic policies that by definition are not targeted and affect the whole population. This volume presents a comprehensive array of macro-micro modeling frameworks. It begins by highlighting the limitation of macroeconomic models that use representative household groups to link macroeconomic policies and microeconomic data. It then moves to more complexes, top-down modeling frameworks, which combine (top) macro models and (down) micro simulation models that, in turn, can be simple micro accounting models or behavioral micro models. The book also explores integrated models, in which the macro and micro parts are either linked by iterative feedback loops or solved simultaneously as a single model. By providing clear access to these techniques, by documenting their analytical underpinnings, their data requirements, and their range of applicability, and even by highlighting some of their limitations, this book provides a unique compendium for practitioners, policy makers, and anyone interested in economic development Introduction : Evaluating The Impact Of Macroeconomic Policies On Poverty And Income Distribution / François Bourguignon, Maurizio Bussolo, And Luiz A. Pereira Da Silva -- Part 1: Winners And Losers From Trade Reform In Morocco / Martin Ravallion And Michael Lokshin -- Trade Options For Latin America : A Poverty Assessment Using A Top-down Macro-micro Modeling Framework / Maurizio Bussolo ... [et Al.] -- Part 2: Examining The Social Impact Of The Indonesian Financial Crisis Using A Macro-micro Model / Anne-sophie Robilliard, François Bourguignon, And Sherman Robinson -- Can The Distributional Impacts Of Macroeconomic Shocks Be Predicted? A Comparison Of Macro-micro Models With Historical Data For Brazil / Franco H.g. Ferreira ... [et Al.] -- Part 3: Distributional Effects Of Trade Reform : An Integrated Macro-micro Model Applied To The Philippines / François Bourguignon And Luc Savard -- Simulating Targeted Policies With Macro Impacts : Poverty Alleviation Policies In Madagascar / Dennis Cogneau And Anne-sophie Robilliard -- Wealth-constrained Occupational Choice And The Impact Of Financial Reforms On The Distribution Of Income And Macro Growth / Xavier Giné And Robert M. Townsend -- Part 4: Aid, Service Delivery, And The Millennium Development Goals In An Economywide Framework / François Bourguignon, Carolina Díaz-bonilla, And Hans Lofgren -- Conclusion : Remaining Important Issues In Macro-micro Modeling / François Bourguignon, Maurizio Bussolo, And Luiz A. Pereira Da Silva. François Bourguignon, Maurizio Bussolo, Luiz A. Pereira Da Silva, Editors. Includes Bibliographical References And Index. Introduction : evaluating the impact of macroeconomic policies on poverty and income distribution / Franрcois Bourguignon, Maurizio Bussolo, and Luiz A. Pereira da Silva Part 1: Winners and losers from trade reform in Morocco / Martin Ravallion and Michael Lokshin Trade options for Latin America : a poverty assessment using a top-down macro-micro modeling framework / Maurizio Bussolo [et al.] Part 2: Examining the social impact of the Indonesian financial crisis using a macro-micro model / Anne-Sophie Robilliard, Franрcois Bourguignon, and Sherman Robinson Can the distributional impacts of macroeconomic shocks be predicted? A comparison of macro-micro models with historical data for Brazil / Franco H.G. Ferreira [et al.] Part 3: Distributional effects of trade reform : an integrated macro-micro model applied to the Philippines / Franрcois Bourguignon and Luc Savard Simulating targeted policies with macro impacts : poverty alleviation policies in Madagascar / Dennis Cogneau and Anne-Sophie Robilliard Wealth-constrained occupational choice and the impact of financial reforms on the distribution of income and macro growth / Xavier Ginвe and Robert M. Townsend Part 4: Aid, service delivery, and the millennium development goals in an economywide framework / Franрcois Bourguignon, Carolina Dвiaz-Bonilla, and Hans Lofgren Conclusion : remaining important issues in macro-micro modeling / Franрcois Bourguignon, Maurizio Bussolo, and Luiz A. Pereira da Silva. Introduction / Bourguignon, Bussolo, Pereira da Silva Chap. 1: Winners and losers from trade reform in Morocco / Lokshin and Ravallion Chap. 2: A micro-macro assessment of the poverty impacts of the Doha and FTAA agenda for Latin America / Bussolo, Lay, van der Mensbrugghe Chap. 3: Top-down micro modeling: examining the social impact of the Indonesian financial crisis unsing a micro-macro model / Bourguignon, Robilliard, Robinson Chap. 4: Top-down micro modeling: can the distributional impacts of macroeconomic shocks be predicted? A comparison of macro-micro models, with historical data for Brazil / Ferreira, Leite, Pereira da Silva, Picchetti Chap. 5: A CGE integrated multi-household model with segmented labor markets and unemployment / Francois Bourguignon, Luc Savard Chap. 6: Integrated macro-micro model: poverty alleviation policies in Madagascar: a macro-micro simulation / Cogneau, Robilliard Chap. 7: Wealth constrained occupation choice and the impact of financial liberalization: micro income distribution and macro growth / Gine, Townsend Chap. 8: Aid, service delivery and the MDGS in an economy-wide framework / Bourguignon, et al. Conclusions / Bourguignon, Bussolo, Pereira da Silva.