Trade Liberalization and Poverty in Morocco: A General Equilibrium Micro-Simulation Analysis (Liberalisation Commerciale Et Pauvrete AU Maroc: Une Analyse En Equilibre General Micro-Simule)

Abstract

We analyse the simulated effects of a tariff reduction as outlined in the Morocco-European Union (EU) trade agreement. Two-thirds of Morocco's trade is with the EU. The analysis is based on a CGE model that integrates 5129 households from a 1998-99 national household standards of living survey and the 34 sectors from Morocco's 1998 input-output table. Our results indicate that poverty declines as a result of this trade liberalization. However, the impacts are weak given that tariffs are only partially reduced between 1998 and 2005 in the context of this agreement. Reductions are much stronger for industrial goods than for agricultural goods. A microeconomic analysis reveals that, nationally, two-thirds of households post welfare gains. This proportion rises to three-quarters in rural Morocco. The absolute gains and losses are larger among the richest households but, in relative terms, they are distributed fairly uniformly. We profile the characteristics of the households that win and those who lose as a result of this trade agreement.

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Keywords: Trade liberalization, poverty, computable general equilibrium (CGE) model, microsimulation, Morocco

JEL Classification: C68, D58, F17, I32, O24