Distributional Effects of the Panama Canal Expansion
This paper uses a dynamic macro-micro framework to evaluate the potential distributional effects of the expansion of the Panama Canal. The results show that large macroeconomic effects are only likely during the operations phase (2014 and onward),...
| Main Authors: | , , |
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| Format: | Policy Research Working Paper |
| Language: | English |
| Published: |
2012
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| Subjects: | |
| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20111020102130 http://hdl.handle.net/10986/3615 |
| Summary: | This paper uses a dynamic macro-micro
framework to evaluate the potential distributional effects
of the expansion of the Panama Canal. The results show that
large macroeconomic effects are only likely during the
operations phase (2014 and onward), and income gains are
likely to be concentrated at the top of the income
distribution. The additional foreign exchange inflows during
the construction and operations phases result in the loss of
competitiveness of non-Canal sectors (Dutch disease) and in
higher domestic prices, which hurt the poorest consumers. In
addition, the construction and operation activities increase
demand for more educated non-farm formal workers. Although
these changes encourage additional labor movement out of
agriculture and from the informal to the formal sector, much
of the impact is manifested in growing wage disparities and
widening income inequality. Using the additional revenues of
the Canal expansion in a targeted cash transfer program such
as "Red de Oportunidades", the Government of
Panama could offset the adverse distributional effects and
eradicate extreme poverty. |
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