Growth and distributional effects of trade liberalization and alternative free trade agreements: A macro-micro analysis with an application to Egypt

The dissertation examines the impact of trade liberalization and free trade agreements (FTAs) on growth, inequality, and poverty in light of Egypt's efforts to integrate its economy with the rest of the world. Do the new trade arrangements promote economic growth? And if so, what are the implications of this growth for the distribution of income and poverty? Should Egypt pursue FTAs with all of its trading partners? And what are the gains from unilateral trade liberalization versus the gains from FTAs?; The dissertation develops a macro-micro analytical framework that links a dynamic (recursive) computable general equilibrium (CGE) model with micro data to simultaneously capture and quantify the net impacts (direct and indirect) of trade policy reforms on growth, inequality, and poverty. Consequently, the dissertation employs a cross entropy (CE) technique to construct a 1999/2000 social accounting matrix (SAM) for Egypt with multiple trading partners, a dynamic CGE model, and follows an approach for linking the model with micro data to analyze income distribution and poverty. This modeling approach takes better account of the complexities involved in the trade-growth-poverty nexus.; The findings indicate that all trade reform scenarios imply positive economic gains. Unilateral trade liberalization entails modest economic gains and modest reductions in poverty. The gains are slightly higher when the rest of the world follows a free trade path---all trading partners grant Egypt exports duty-free access to their markets. Together, a unilateral trade liberalization path and a free trade path magnify the gains---higher growth and lower poverty rates. Results for Individual FTAs are similar but are smaller in their impact. In addition to trade reforms, a combination of productivity enhancing measures along with a reallocation of government transfers to rural households where poverty is relatively high is a recipe for higher growth and significant reductions in poverty gap between rural and urban households. The results imply modestly accelerated growth from trade liberalization when the model introduces a mechanism by which trade openness can increase productivity growth.