《Trade》.pdf

+Model ARTICLE IN PRESS JPO-5935; No. of Pages 19 Available online at Journal of Policy Modeling xxx (2011) xxx–xxx Trade, growth, and poverty in Zambia: Insights from a dynamic GE model Edward F. Buffie a,∗, Manoj Atolia b a Department of Economics, Indiana University, Bloomington, IN 47405, United States b Department of Economics, Florida State University, Tallahassee, FL 32306, United States Received 11 March 2011; received in revised form 11 May 2011; accepted 11 July 2011 Abstract We analyze how trade policy and aid affect poverty and economic development in a dynamic optimizing model that features a full array of imports (intermediates, consumer goods, and capital goods), transport and distribution costs, sector-specific capital, public investment in social and physical infrastructure, learning externalities, and a dualistic labor market. Our main finding is that policy packages that combine an escalated structure of protection with an escalated structure of export promotion score best; there is no support for the view that free trade or a low uniform tariff is approximately optimal. © 2011 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved. JEL classification: F13; O24; O41 Keywords: Poverty; Aid; Trade liberalization; Infrastructure 1. Introduction Many LDCs suffer from low levels of private investment, from acute shortages of social and physical infrastructure, and from widespread poverty and underemployment. How can trade policy help combat these problems? Neoclassical trade theory objects that the premise of the question is incorrect. According to the Principle of Targeting, it is better to use other policy instruments to counteract market imperfections and to target social obje