King, Damien; Handa, Sudhanshu
Author Affiliation, Ana.
Department of Economics
The welfare effects of balance of payments reform: A macro-micro simulation of the cost of rent-seeking
The journal of development studies
Date of Publication
Proposes a methodology for analysing the effect of balance of payments liberalisation measures of poverty and distribution and applies it to the case of Jamaica in the 1990s. The methodology consists of a macro-micro simulation in which a CGE model provides labour market outcomes, which in turn are used to manipulate the sectoral allocation of employment to generate the income distribution consistent with the new labour market outcome. Notes that in the application to Jamaica, the reallocation of resources away from rent-seeking activities in the presence of exchange controls is significant and has large macroeconomic effects. Opening up of the current accout has little effect on poverty, but liberalisation of the capital account reduces poverty, especially amongst the poor. Neither policy change taken separately, nor the combination of the two, has more than a negligible effect on the distribution of income.....