Trade reform and poverty—Lessons from the Philippines: A CGE-microsimulation analysis

Little is known about the poverty implications of major trade reforms in the Philippines. Using a CGE-microsimulation analysis, tariff cuts between 1994 and 2000 are shown to have been generally poverty-reducing. This is due to a fall in consumer prices and, to compensate lost tariff revenue, an increase in direct taxes that primarily hits the non-poor. Experiments where lost tariff revenue is compensated by increased sales taxes instead of direct taxes indicate that this would have had much more negative poverty implications. Poverty in Manila falls most as unskilled urban workers profit from the expansion of semi-conductor exports.