The Social Impact Of A WTO Agreement In Indonesia

Abstract

Indonesia experienced rapid growth and the expansion of the formal financial sector during the last quarter of the 20 th century. Although this tendency was reversed by the shock of the financial crisis that spread throughout Asia in 1997 and 1998, macroeconomic stability has since then been restored, and poverty has been reduced to pre-crisis levels. Poverty reduction remains nevertheless a critical challenge for Indonesia with over 110 million people (53 percent of the population) living on less than $2 per day.The objective of this study is to help identify ways in which the Doha Development Agenda might contribute to further poverty reduction in Indonesia. In order to provide a good technical basis for answering this question, we use an approach which combines a Computable General Equilibrium (CGE) model with a microsimulation model. This framework is designed to capture important channels through which macroeconomic shocks affect household incomes. It allows making recommendations on specific trade reform options as well as on complementary development policy reforms.The framework presented in this study generates detailed poverty outcomes of trade shocks. Given the magnitude of the shocks examined here and the structural features of the Indonesian economy, only the full liberalization scenario generates significant poverty changes. Their impact is examined under alternative specifications of the functioning of labor markets. These alternative assumptions generate different results, all of which confirm that the impact of the full liberalization on poverty would be beneficial, with wage and employment gains dominating the adverse food price changes that could hurt the poorest households. Two alternative tax replacement schemes are examined. While direct tax replacement appears to be more desirable in terms of efficiency gains and translates into higher poverty reduction, political and practical considerations could lead the Government of Indonesia to choose a replacement scheme through the adjustment of VAT rates across nonexempt sectors.

Urban-Rural Interactions

“…However, there are some publications, such as Hérault (2005) and Robilliard and Robinson (2005), which describe the linkage between micro-and macro-models, often MSM models and CGE (Computable General Equilibrium) models. However, there are some publications, such as Hérault (2005) and Robilliard and Robinson (2005), which describe the linkage between micro-and macro-models, often MSM models and CGE (Computable General Equilibrium) models.…”

Growing Together Or Growing Apart ? A Village Level Study Of The Impact Of The Doha Round On Rural China

“…These models typically take representative samples of micro agents (households or firms) and measure the effect of government policy on these samples. Various MS techniques are described in more detail in the annex to the associated working paper (Robilliard and Robinson 2005; see also Cogneau, Grimm, and Robilliard 2003).…”

“…The fully disaggregated SAM used has 39 activity accounts and 22 commodity accounts. Full detail is presented in the Policy Research Working Paper accompanying this chapter (Robilliard and Robinson, 2005).…”

“…More details of the shocks fed into the CGE model are given in annex B of the World Bank Policy Research Working Paper version of this chapter (Robilliard and Robinson 2005). Because the Indonesia model assumes export prices are exogenous and fixed, the approach used here diverge from the approach outlined in chapter 3 and simply shock export prices.…”

Trade Integration with the European Union: Poverty Impacts in Ecuador

“…See also Robilliard, Bourguignon, and Robinson (), Robilliard and Robinson (), and Bussolo and Lay ().…”