Effects of AFTA on Poverty<br/> : Evidence from Laos

Kyophilavong, Phouphet; Record, Richard; Takamatsu, Shinya; Nghardsaysone, Konesawang; Sayvaya, Inpaeng

doi:2016.31.2.353

The Journal of Economic Integration 2016 June;31(2) :353-376.
DOI: https://doi.org/10.11130/jei.2016.31.2.353

Effects of AFTA on Poverty
: Evidence from Laos

Phouphet Kyophilavong, Richard Record, Shinya Takamatsu, Konesawang Nghardsaysone, Inpaeng Sayvaya,

National University of Laos, Vientiane, Lao PDR
World Bank, Vientiane, Lao PDR
World Bank, Washington DC, United States
Champasack University, Champasack Province, Lao PDR

Corresponding Author: Phouphet Kyophilavong ,Tel: +856-21-770067, Fax: +856-21-740874, Email: phouphetkyophilavong@gmail.com

ABSTRACT

The Association of South-East Asian Nations Free Trade Agreement plays an important role in regional economic development. However, Association of South-East Asian Nations Free Trade Agreement’s contribution to poverty reduction remains unclear. Therefore, the main objective of this study is to assess the impact of Association of South-East Asian Nations Free Trade Agreement on poverty using Laos as a case study. To do so, we apply a Computable General Equilibrium model, microsimulation, and a logit model. Laos benefits from Association of South-East Asian Nations Free Trade Agreement but has also experienced an increase in its trade deficit. The primary benefits from Association of South-East Asian Nations Free Trade Agreement derive from the improvement in trade facilitation and a significant increase in Foreign Direct Investment. Association of South-East Asian Nations Free Trade Agreement may also reduce income inequality at the national level. However, Association of South-East Asian Nations Free Trade Agreement could cause disparities between the so-called winners and losers. The beneficiaries of Association of South-East Asian Nations Free Trade Agreement might be limited to households that have access to land, irrigation, road, and electricity.

JEL Classification

F15: Economic Integration
F17: Trade Forecasting and Simulation

Keywords: Association of South-East Asian Nations | Computable General Equilibrium Model | Laos | Microsimulation