1. Trade Liberalization or Productivity Increase?
Amal ELBESHBISHI
Mitsuhiko KATAOKA
Outline:
Motivation
Assumptions
Results
Analysis
Implications

2. Motivation Base Scenario: EU RSA Benefit from FTA But Botswana Not.
Botswana: Decrease in welfare. Endowment effect: 0.9 % decline in the use of unskilled labor.
The original study didn’t take the effect of technical change into consideration.

3. Assumptions & Scenarios
Assumptions - Closure Change
Exogenous: Supply of Labor
Endogenous: Real Wage Rate
2 Scenarios: 2% Productivity Increase
Region: Botswana, Sector: Agriculture
1st: Unskilled Labor (afeall)
2nd: Output (aoall)

4. Simulation Results - 1
Base scenario: Botswana experiences m decrease in welfare due to trade liberalization and the 0.29 % decrease in real GDP.
Trade labialization in Botswana has a negative effects on both its welfare and economy.
In S1, In
Agricultural output (qo):
Base scenario: grain 2.6, veg 3.12, oagric 1.81
Alternative scenario: grain 3.56, veg 4.15, oagric 2.76
Export sales of agricultural products (qxs):
Base scenario: grain -4.67, veg 4.79, oagric 0.59
Alternative scenario: grain 16.9, veg 19, oagric 14.4
Alternative scenario:
after 2% productivity Increase in Agri, GDP increase so this increase in productivity compensate partially for the negative impact of trade liberalization (-29.62m)
S1 shows productivity increase in unskilled labor (afeall) whereas S2 shows productivity increase in Output (aoall).

5. Simulation Results2 – Tech1 Unskilled Labor -
The unskilled labor increased!
Expansion Effect is the Major Source!
Share of Agr in total value added in endowment is big enououh!
qfe(i,j,r) = - afe(i,j,r) + qva(j,r) - ESUBVA(j,r) * [pfe(i,j,r) - afe(i,j,r) - pva(j,r)];
qva(j,r) = -ava(j,r) + qo(j,r) - ao(j,r) qo(i,r) = SHRDM(i,r) * qds(i,r) + sum(s,REG, SHRXMD(i,r,s) * qxs(i,r,s)) + tradslack(i,r);

6. Implication
Although trade liberalization is important but we can’t glorify it’s effect.
Not only Demand Side but also Supply Side should be focused.