The Impact of Trade Openness on Poverty via Agricultural TFP in Ethiopia: A Sequential Dynamic Computable General Equilibrium Micro Simulation Analysis

Abstract

This study tries to address the impact of trade on poverty through of agricultural total factor productivity (TFP). Thus, we employed a Sequential Dynamic Computable General Equilibrium Model linked to a Micro Simulation Model. We also used an econometric model to estimate the agricultural TFP of Ethiopia to create scenarios. The estimation results of this study shows that trade openness has a positive impact on agricultural TFP and our simulation result revealed that the proposed policy change mainly tariff cut and trade induced agricultural TFP have an incremental effect on all macroeconomic variables. However, poverty is exacerbated due to trade openness and tariff reduction during the simulation period.

Key words: Trade Openness, Agricultural Total Factor Productivity (TFP),
Dynamic Computable General Equilibrium (DCGE), Micro-simulation (MS),
Poverty, Ethiopia