Trade liberalization in Kenya started in the early 1980s with the structural adjustment
programmes, and continued under the multilateral framework of the WTO. During the same
period, the incidence of poverty and level of inequality also worsened. The government’s focus on
trade negotiations has been to ensure that there is policy space for the daily running of the economy
even though welfare impacts are also important. Non-state actors have argued that trade
liberalization has negatively affected the poor; particularly the farmers, since they cannot compete
with the developed countries whose farmers enjoy significant government support through subsidies,
making their products much cheaper in the world market. Government officials, on the other hand,
contend that trade liberalization is good as it brings in competition and transfer of technology which
is good for an economy. It is important to examine how trade liberalization has affected
household’s welfare in Kenya, given that this kind of analysis has not been conducted in Kenya.
This study is unique because it does not assume the existence of a trade liberalization–
poverty relationship, unlike most studies. It uses a multi-method approach to first test the
hypothesis that there is no statistically significant relationship between trade liberalization and
poverty, it further tests for multiplier effects of trade liberalization on poverty determinants. Trade
Liberalization and poverty is found to have a stochastic relationship, furthermore investments and
capital stock were found to significantly affect poverty determinants in the stochastic model. Due to
unavailability of household welfare measure data in time series, a CGE model was used to
establish the dynamics of trade liberalization on poverty at a point in time using the 2003 Social
Accounting Matrix Data for Kenya. Overall, trade liberalization accompanied by FDI had the
greatest impact on household welfare.
Trade liberalization had a positive impact on household welfare since household incomes and
consumption increased. Micro simulations results, based on changes in consumption, also showed
that poverty incidence reduced for all households, even though the urban households experienced
higher decreases. The study found that there was little difference in protecting sensitive products and
not protecting them; secondly, trade liberalization accompanied by foreign direct investment had
greater impact on improving the household welfare. Consumption and incomes increased, resulting
in overall poverty reduction. The welfare of urban households was much higher than rural
households in terms of income and consumption increases. However, income inequality was much
higher in urban than rural areas. / Economics / D. Litt. et Phil. (Economics)
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:unisa/oai:uir.unisa.ac.za:10500/8769 |
| Date | 11 March 2013 |
| Creators | Omolo, Miriam |
| Contributors | Van Aardt, Carel |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | 1 online resource (111, 213 leaves) |
| Rights | University of South Africa |
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