The Impact of Trade Liberalization on Poverty in Kenya

The Impact of Trade Liberalization on Poverty in Kenya

By Miriam W. O. Omolo

IEA Research Paper

The Impact of Trade Liberalization on Poverty in Kenya

By: Miriam W. O. Omolo

May 2011

Published by Institute of Economic Affairs With the support of International Development Research Centre

Edited By Jonathan Tanui Zilper C. Audi

©Institute of Economic Affairs, 2011 5th Floor ACK Garden House 1st Ngong Avenue P.O. Box 53989-00200 Nairobi, Kenya Tel: 242-20-2721262, 2717402 Fax: 254-20-2716231 Cell: 0724-256510, 0733-272126 Email: admin@ieakenya.or.ke Website: www.ieakenya.or.ke

ISBN No. 978-9966-1561-5-0

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The Impact of Trade Liberalization on Poverty in Kenya

Table of Content

1.0

1.1 1.2 1.3 1.4

Introduction

Statement of the problem Objectives of the Study Significance of the Study Organization of the Paper

4

4 5 5 6

2.0

2.1 2.2

Trade Liberalization in Kenya

Background The Current WTO Trade Negotiations and Liberalization Scenarios

6

6 7

3.0

3.1 3.2 3.3

Methodological Framework

International Trade Theory. The Neoclassical Theory The CGE Model Data

10

10 11 12

4.0

4.1 4.2 4.3 4.4

Simulation Results and Discussion

Price and Volume Effects Factor Movement and Value Added Consumption Effects Welfare Effects

13

13 17 20 20

5.0

Conclusion and Policy Recomendations

22 23 25

References Appendixes

The Impact of Trade Liberalization on Poverty in Kenya

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1.0 Introduction

The debate on trade liberalization and its impact on poverty has remained a subject of debate in several forums, both at international and local level. This debate has been prolonged by the fact that there are no theoretical underpinnings that directly link trade liberalization to poverty. Trade liberalization is the removal or reduction of barriers to trade that ensures free movement of goods and services from one nation...