Tariff elimination, gender and poverty in the Philippines: a computable general equilibrium (CGE) microsimulation analysis

This study analyzes the economic effects of tariff elimination policies in the Philippines with the aid of PHILGEM: a detailed single-country computable general equilibrium model of the Philippine economy. We focus on income distribution, comparing rich to poor and men to women. To this end, PHILGEM includes a social accounting matrix (SAM), which distinguishes 38,400 households. The key to rich detail in household results is a very detailed pattern of connection between core CGE outcomes (earnings by sector) and individual household incomes. We divide individual labour income between 7 labour types and 2 genders in 105 sectors. Each household may include several wage earners with different characteristics. We find that tariff elimination benefits the Philippine economy: conventional triangle welfare gains outweigh terms of trade losses. Men benefit but women benefit slightly more; because some expanding export-oriented sectors employ more women. Although unilateral tariff elimination reduces the poverty headcount, Gini income inequality increases slightly. If other countries also liberalize, then both poverty headcount and income inequality decline. Our 38,400 households are drawn from a nationally-representative household survey of Philippines. We compare several different methods of using so much household detail. We find it computationally feasible to represent all 38,400 households directly in the model; or, more conventionally, to use a more aggregated CGE model to drive a microsimulation model. A key question that affects results is whether to adjust national accounts and household survey data to be consistent. We also use a dynamic version of PHILGEM to trace out the adjustment between short- and long-run equilibriums. The results from dynamic simulation broadly reproduce conclusions drawn from our comparative-static simulations.