Nicaragua

Abstract

This chapter assesses the expected impact of a successful implementation of the Doha Development Agenda on households in Nicaragua, differentiating between urban and rural areas and presenting results by deciles of household per capita expenditure to identify effects on the distribution of income. We also investigate the implications for poverty of some potential domestic policy changes, to help in showing other avenues for improving welfare in Nicaragua. The empirical approach follows that of Winters, in which changes in international prices and quantities are mapped onto household data.1 Key elements are the changes in international prices, imports, and exports that are estimated in chapter 2 by Kee, Nicita, and Olarreaga for two different scenarios. The base case scenario, referred to as business as usual, involves a 40 percent reduction in bound tariffs, with applied tariffs varying accordingly; a reduction in all tariff peaks to a maximum of 50 percent; a 40 percent reduction in support for domestic agriculture; elimination of agricultural export subsidies; and an improvement in trade facilitation. The ambitious scenario entails much deeper global trade liberalization: full elimination of tariffs and subsidies, the same improvement in trade facilitation, and a 50 percent reduction in the restrictiveness of nontariff measures. Copyright © 2007 center for the study of globalization, yale university and groupe d'economie mondiale, sciences po All rights reserved.