Sectoral Strategy and Poverty : The Case of Togo

A general calculable equilibrium model, calibrated using the 2000 SAM, was developed to analyze the possible effects of an external price shock and the effects of a sectoral investment strategy on the distribution of income in Togo in the context of the PRSP. Analysis of the SAM was used to highlight the importance of food production in the creation and distribution of income in Togo. This sector contributes 20% of the country's value added, 67 percent of which is paid to informal labour in the form of wages. Given that poverty is most prevalent in rural areas, where there is a 74.3 percent incidence of poverty as opposed to 36.8 percent for urban areas, it is reasonable for the government to make improved productivity and the creation and distribution of wealth in rural areas a national priority. The effects of a ten percent increase in capital in both food and cash crop farming are as follows: (i) an increase in value added and production, along with a decrease in agricultural prices; (ii) improved price-competitiveness for the economy; (iii) an increase in final consumption and net exports, resulting in an expansion of GDP; (iv) an increase in real wages for informal labour, which is heavily used in the agricultural sector, along with lower wages in the formal sector; and (v) higher real income and welfare for households. This analysis thus confirms that increasing investment in agriculture, particularly for food crops, could improve the distribution of income and welfare in rural areas. Moreover, the simulation of a ten percent increase in export prices for cash crops, textiles, and fats and oils reveals non negligible macroeconomic and sectoral effects as well as improved welfare