Agriculture-sector Policies and Poverty in the Philippines: a Computable General-Equilibrium (CGE) Analysis

The Philippines has undertaken substantial trade-policy reforms since the 1980s. However, the poverty impact is not very clear and has been the subject of intense debate, most crucial of which is the likely poverty effects of liberalizing the highly protected agricultural sector. A CGE micro-simulation model is employed to estimate and explain these impacts. Tariff reduction induces consumers to substitute cheaper imported agricultural products for domestic goods, thereby resulting in a contraction in agricultural output. In contrast, the prevalence of cheap, imported inputs reduces the domestic cost of production, benefiting the outward-oriented and import-dependent industrial sector as their output and export increases. The national poverty headcount decreases marginally as lower consumer prices outweigh the income reduction experienced by the majority of households. However, both the poverty gap and severity of poverty worsens, implying that the poorest of the poor become even poorer.