The Impact of MacroEconomic Policies on Poverty and Income Distribution
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The Impact of MacroEconomic Policies on Poverty and Income Distribution

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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.


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Published 19 June 2008
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Macro–Micro Evaluation
Techniques and Tools
François Bourguignon
Maurizio Bussolo
Luiz A. Pereira da Silva
Macro-Micro Evaluation
Techniques and ToolsTHE IMPACT OF
Macro-Micro Evaluation
Techniques and Tools
François Bourguignon
Maurizio Bussolo
Luiz A. Pereira da Silva
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ISBN: 978-0-8213-5778-1 (soft cover) and 978-0-8213-7268-5 (hard cover)
eISBN: 978-0-8213-5779-8
DOI: 10.1596/978-0-8213-5778-1 (soft cover) and 10.1596/978-0-8213-7268-5 (hard cover)
Library of Congress Cataloging-in-Publication Data
The impact of macroeconomic policies on poverty and income distribution : macro-micro
evaluation techniques and tools / edited by François Bourguignon, Maurizio Bussolo, and
Luiz Pereira da Silva.
p. cm.
Includes bibliographical references and index.
ISBN 978-0-8213-5778-1 — ISBN 978-0-8213-5779-8 (electronic)
1. Economic assistance—Evaluation. 2. Poverty. 3. Income distribution. 4. Economic
assistance—Developing countries—Evaluation. 5. Developing countries—Economic
policy—Case studies. I. Bourguignon, François. II. Silva, Luiz A. Pereira da. III. Bussolo,
Maurizio, 1964-
HC60.I4147 2008
Preface xi
Acknowledgments xiii
Contributors xv
Abbreviations xvii
1 Introduction: Evaluating the Impact of
Macroeconomic Policies on Poverty and Income
Distribution 1
François Bourguignon, Maurizio Bussolo, and
Luiz A. Pereira da Silva
Part I. Top-Down Approach with Micro Accounting
2 Winners and Losers from Trade Reform in Morocco 27
Martin Ravallion and Michael Lokshin
3 Trade Options for Latin America: A Poverty
Assessment Using a Top-Down Macro-Micro
Modeling Framework 61
Maurizio Bussolo, Jann Lay, Denis Medvedev, and
Dominique van der Mensbrugghe
Part II. Top-Down Approach with Behavioral
Micro Simulations
4 Examining the Social Impact of the Indonesian
Financial Crisis Using a Macro-Micro Model 93
Anne-Sophie Robilliard, François Bourguignon,
and Sherman Robinson
5 Can the Distributional Impacts of Macroeconomic
Shocks Be Predicted? A Comparison of Top-Down
Macro-Micro Models with Historical Data
for Brazil 119
Francisco H. G. Ferreira, Phillippe G. Leite,
Luiz A. Pereira da Silva, and Paulo Picchetti
Part III. Macro-Micro Integrated Techniques
6 Distributional Effects of Trade Reform:
An Integrated Macro-Micro Model Applied
to the Philippines 177
François Bourguignon and Luc Savard
7 Simulating Targeted Policies with Macro Impacts:
Poverty Alleviation Policies in Madagascar 213
Denis Cogneau and Anne-Sophie Robilliard
8 Wealth-Constrained Occupational Choice and the
Impact of Financial Reforms on the Distribution
of Income and Macro Growth 247
Xavier Giné and Robert M. Townsend
Part IV. Macro Approach with Disaggregated
Public Spending
9 Aid, Service Delivery, and the Millennium
Development Goals in an Economywide
Framework 283
François Bourguignon, Carolina Díaz-Bonilla,
and Hans Lofgren
10 Conclusion: Remaining Important Issues in
Macro-Micro Modeling 317
François Bourguignon, Maurizio Bussolo,
and Luiz A. Pereira da Silva
Index 325
3.1 Consistency Issues 67
1.1 Schematic Representation of the Top-Down
Modeling Approach 12
2.1 Impacts of Trade Reform Policies on Poverty
in Morocco 40
2.2 Frequency Distributions of Gains and Losses for
Trade Policies 1 and 4 42
2.3 Absolute and Proportionate Gains for Policies 1
and 4 43CONTENTS vii
2.4 Production and Consumption Decomposition of
the Welfare Impacts for Policy 4 44
2.5 Net Producers of Cereals in the Distribution of
Total Consumption per Person in Rural Areas
of Morocco 45
5.1 A Simplified Overview of the Top-Down
Macro-Micro Framework 121
5.2 An Overview of the Main Blocks of the
Macro Model 130
5.3 Comparison between Actually Observed Changes
and Experiment 1, Using Representative
Household Groups 155
and Experiment 1, Using Representative Household
Groups, and Experiment 2, Using Pure
Micro Simulation Model 156
5.5 Comparison between Actually Observed Changes
Groups, Experiment 2, Using Pure Micro
Simulation Model, and Experiment 3, Using
Full Macro-Micro Linking Model 157
6.1 Iterative Resolution of the Integrated Multihousehold
CGE Model 182
6.2 Comparative Growth Incidence Curves for Total
1Population: IMH_FX_w versus IMH_FL_w 202
1 1w versus MSS_FX_w 205
7.1 Fully Integrated Macro-Micro Model Structure 223
7.2 Benefit Incidence of an Agricultural Subsidy under
Various Specifications 233
7.3 Benefit Incidence of a Total Factor Productivity
Shock in the Agricultural Sector 234
8.1 Occupational Choice Map 255
8.2 Occupational Choice Maps, Socio-Economic
Survey Data and Townsend-Thai Data 258
8.3 Foreign Capital Inflows and Financial Liberalization 262
8.4 Intermediated Model, Townsend-Thai Data,
1976–96 264
8.5 Intermediated Model, Socio-Economic Survey Data,
1976–96 265
8.6 Welfare Comparison, Townsend-Thai Data, 1979 269viii CONTENTS
8.7 Welfare Comparison, Socio-Economic Survey
Data, 1996 272
8.8 Access to Capital and Foreign Capital Inflows,
Socio-Economic Survey Data and Townsend-Thai
Data 274
9.1 Foreign Aid per Capita 303
9.2 Real Wages of Labor with Secondary Education 305
9.3 Present Value of Foreign Aid 306
9.4 Trade-Offs between Human Development and
Poverty Reduction 308
2.1 Predicted Price Changes Due to Agricultural Trade
Reform in Morocco 34
2.2 Consumption Shares and Welfare Impacts through
Consumption 36
2.3 Percentage Gains from Each Policy: Production
Component 37
2.4 Household Impacts of Four Trade Reforms 38
2.5 Mean Gains from Policy 4, by Region 41
2.6 Decomposition of the Impact on Inequality 46
2.7 Summary Statistics on Explanatory Variables in the
Regression Analysis 48
2.8 Regression of per Capita Gain/Loss on Selected
Household Characteristics 49
2.9 Urban-Rural Split of Regressions for per Capita
Gains 51
3.1 LINKAGE Model: Regional and Sectoral Groups 65
3.2 Trade Protection by Origin, Destination, and Sector 70
3.3 Economic Structure for Brazil, Chile, Colombia,
and Mexico 74
3.4 Household Incomes by Source, Segment, and
Poverty Status 76
3.5 Sectoral Adjustments 78
3.6 Price (Factors, Consumption Aggregates) and Real
Income Changes 80
3.7 Initial Poverty Levels and Percentage Changes
Resulting from Trade Reforms 82
3.8 Income Elasticity of Poverty Headcount 84
4.1 Evolution of Poverty in Indonesia, 1996–99 107CONTENTS ix
4.2 Evolution of Occupational Choices and Wages
by Segment, 1997–98 108
4.3 Historical Simulation Results 109
4.4 Simulation Results: Macro Aggregates 111
4.5 Simulation Results: Per Capita Income, Inequality,
and Poverty Indicators 112
5.1 An Overview of the Three Experiments
Conducted 122
5.2 Standard Multipliers of the Macro Model
Compared with Other Macro Models 132
5.3 Some Results of the Macro Model, Historical
Simulation for 1999 133
5.4 Major Results of the Public Sector and Financial
Sector Modules, Historical Simulation for 1999 134
5.5 Aggregate Results from the Macro Model,
Occupations 137
Earnings 140
5.7 Detailed Results from the Top-Down Macro-Micro
Models, Occupations by Skill and Sector 148
5.8 Aggregate Results from the Top-Down
Macro-Micro Models, Earnings 151
5.9 Paired t Test 158
5A.1 Log Earnings Regression 162
5A.2 Occupational Structure Multinomial Logit Model:
Marginal Effects, Rural 164
Marginal Effects, Urban 167
6.1 Definition of Model Specification Used 194
6.2 Macro Results 195
6.3 Structural Effects of the Trade Reform, Output
(Value Added) Change by Sector 197
6.4 Effects on Poverty (FGT Poverty Indexes) for the
Whole Population and by Education Groups 199
6A.1 Labor Supply Model Estimation Results 206
6B.1 Education Code Definition 207
6C.1 Notations 207
7.1 Minimum Yearly Wages, 1990–96 226
7.2 Distribution of Beneficiary Households across
Quintiles 227
7.3 Macroeconomic Impact of Alternative Policies 229
7.4 Employment Impact of Alternative Policies 230