Impact of Trade Liberalization on Poverty in Bangladesh

Abstract

This article uses a computable general equilibrium (CGE) model to investigate the impact of trade liberalization on poverty in Bangladesh. The simulation results show that the complete removal of tariffs favours export-oriented sectors in the economy. With trade liberalization, rural and urban areas experience an overall reduction in poverty in the short run. However, a marginal increase in the poverty gap and severity of poverty for urban areas is projected, implying that the poor become poorer in urban areas. Moreover, poverty incidences vary among various socio-economic groups. In the short run, poverty incidence increases for rural landless and urban illiterate and low-educated household groups. In contrast, the long-run results highlight that trade liberalization reduces absolute poverty for all groups, both in rural and urban areas.