ABSTRACT
This chapter focuses on recent approaches to evaluating the distributional and poverty impact of policy measures and economic shocks. It reviews some of the methods and tools currently available to evaluate the impact of economic policies on poverty reduction and the distribution of living standards, and explores directions for improvement. Progresses in macro-econometric modeling and estimation techniques allow addressing many of these macro issues in a more satisfactory way. The Computable General Equilibrium models will of course typically be used to study the effect of “structural reforms” like trade policies or indirect taxation, whereas disaggregated macro-econometric models might be preferred when dealing with aggregate demand issues, as with financial or exchange rate crises. When using representative households in disaggregated macro models, the challenge is to design a specific breakdown of the household population that guarantees a maximum coverage of possible distribution effects of policy and shocks.
