Adjustment and equity in Côte d'Ivoire: 1980–86

Abstract

By sub-Saharan standards, Côte d'Ivoire's economic achievement used to be impressive. But the crisis in the 1980s showed the fragility of the country, faced with external shocks and locking efficient instruments to restore growth. Using a simulation model, this paper looks at the impact of two critical aspects of the Ivorian experience (the 1983 drought and the role of migration to rural areas) before assessing the effect on income distribution of three measures: a cut in current expenditures, an increase in the export tax, and a currency depreciation. The simulations show that the drought was responsible for a large fall in growth and an improvement in the agricultural terms of trade that worsened social indicators, while migration back toward the protected rural areas alleviated poverty in the informal sector. Simulations of alternative policies suggest that a cut in current expenditures through a reduction in the wages of public employees reduces income inequality but is ineffective in reducing poverty. Besides not being very effective in reducing the fiscal deficit, an increase in the export tax is distributionally regressive. Only currency depreciation reduces both income inequality and poverty.