Kwabena Adu-Ababio - Microsimulation Approaches To Studying Shocks And Social Protection In Selected Developing Economies

• Presenting author: Kwabena Adu-Ababio (University of Helsinki)

• Authors: Kwabena Adu-Ababio

• Session: C01D - Micro-Macro Linkage - Wednesday 9:00-10:30 - Erika-Weinzierl Hall

• Slides: PDF

In this paper, I calculate automatic stabilization in Ghana, South Africa, and Ecuador to explain how they cushion income amid income and demand shocks. Additionally, I stress-test fiscal policies within these countries to gauge welfare alternatives and insurance. Adopting a discretionary action approach for Ghana, I introduce additional safety nets that improve welfare since it fails shock resistance tests. The use of a microsimulation framework is justified as it can isolate the exact redistributive impact of tax-benefit policies and reforms from a changing environment where such policies operate. Income stabilization ranges from 1% to 22%, while demand stabilization ranges from 4% to 25% across the three countries. I formalize a new concept of poverty stabilization that ranges from nil to 46% to measure vulnerability. Through the study’s results, I reveal that the extent of income insurance needs to be improved in lower income countries.