Throughout the 1980s, the Tunisian economy has faced a deterioration of
its external and internal deficits. The reason behind such deterioration may
be partly attributed to the rapid consumption growth and to the
subsidization of consumer prices which has been the main cause of the
budgetary deficit. This situation led the government to adopt the structural
adjustment plan proposed by the International Monetary Fund in 1986.
This plan involved reforms aimed at the restructuring of the economy so as
to enhance the traded goods sector, the rehabilitation of market
mechanisms and the encouragement of private initiatives. These objectives
were to be accomplished partly through the liberalization of the price
system and through a fiscal reform with mainly the institution of the
added tax in July 1988. The goal of these reforms was to promote a
sustainable economic growth without internal and external deficit
deterioration. Nevertheless, macro-economic adjustment programs have
often raised anxiety concerning their effects on poor population. The
welfare reforms’ effects on poor population have then to be evaluated. It is
necessary to analyze the microeconomic implications of these
macroeconomic reforms to be able to target correctly those social
categories that need protection and identify the social measures that would
have to accompany such reforms.
The aim of this paper is to propose a methodology, consistent with
the consumer theory, that allows the evaluation of the implications of the
price system reforms on the poor population’s welfare. This issue poses an
identification and a measure problem. It also delves on the poverty line
estimation, using a utilitarian approach and the definition of the poor
population welfare measures, that allow the assessment of social loss
subsequent to the presence of poor people having an income level inferior
to the poverty line. Welfare measures advocated in this paper are based on
King’s approach (1983). This approach presents the advantage of
180 Building and Sustaining the Capacity for Social Policy Reforms
considering the households’ reaction to price system reforms. It is based
on the estimation of a demand system that has to respect economic
consumer axioms. A methodology is presented allowing to estimate
parameters of a flexible demand system, as the QAIDS system of Banks et
al. (1993). The parameters estimation of this model have been made
possible using the National Statistic Institute households’ budget and
consumption survey of 1990. The simulation of a price system reform’s
effects on the poor population and the identification of target groups is
addressed. Within the framework of this section, a hypothetical reform is
considered consisting of eliminating the budget devoted to food subsidies.
The impact of this reform on the poor population welfare is examined and
the possibility of reallocating a part of this budget to better tackle the
poverty issue in Tunisia. Socio-demographic indicators are defined which
are likely to lead to a better targeting of the poor populations. Such
targeting would make it possible to reduce public expenditures and also to
improve the well-being of these target groups.

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