An economic analysis of the impacts of trade liberalization on Kenya's maize sector

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Nzuma, Jonathan Makau
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University of Guelph

Kenya like most other developing countries has been reforming her staple grain markets since 1986. In these sectors, market reforms were initiated as a key component of the economy-wide structural adjustment programmes (SAPs). The SAPs were later strengthened and made irreversible by Kenya's commitments at the multilateral trade negotiations. The reforms were envisaged to improve the sectors terms of trade as a means of stimulating food production. However, the impacts of trade reforms on Kenya's maize sector remain controversial. Thus, there is need for empirical research to inform government interventions in this sector. This study evaluates the impacts of trade liberalization and their distributional effects on stakeholders in Kenya's maize sector. Specifically, the objectives are threefold: to assess the price responsiveness of producers, wholesalers and consumers, to quantify the market and welfare impacts of trade liberalization and to draw policy recommendations. The study uses recent developments in time series econometrics based on cointegration techniques and error correction models (ECM) to estimate price responses. To quantify the impacts of trade liberalization, a partial equilibrium model (PEM), which accounts for market interrelationships at the farm, wholesale and retail levels is developed.

Kenya, maize sector, trade liberalization, economic analysis, structural adjustment programmes