The Potential Impact of African Continental Free Trade Area on Exports, Imports, Manufactured Output, and Household Income in Kenya
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Date
2024-06
Authors
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Publisher
Kenyatta University
Abstract
Regional trade agreements can affect trade, manufactured output, and household income in several ways. Regional trade agreements increase demand for commodities in a region, leading to increased trade and manufactured output. Further, Regional trade agreements can affect households through their impact on wages or consumption budget. Kenya has enacted several trade policy reforms, including harmonizing and simplifying tariff lines, removing quantitative restrictions, and joining Regional Trade Agreements to spur international trade and the local economy. These trade policy reforms have led to a substantial reduction in the average weighted applied tariff from 20 percent in 1994 to 9 percent in 2020. Despite the reforms, exports are concentrated in a few geographical regions while imports have continued to rise more than exports. The manufacturing sector has been characterized by slow growth and low productivity compared to other sectors. Further, most Kenyans have low income, and there are substantial regional disparities. This proposal employs computable general equilibrium models to investigate the potential impact of the African Continental Free Trade Area on trade, the manufacturing sector, and household income in Kenya. The proposal contributes to the existing literature in two ways; first, it uses a trade model with heterogeneous firms and monopolistic competition in the manufacturing sector. The heterogenous firm trade model captures more channels between the trade and manufacturing sectors than the competitive trade model. Second, the proposal disaggregates households in Kenya using agricultural ecological zones instead of the rural-urban scheme. Hence, it is possible to link household income to the main economic activity in a region.
Description
A Research Proposal Submitted to the School of Business, Economics, and Tourism in Partial Fulfilment of the Requirement for the Award of Doctor of Philosophy in Economics Degree of Kenyatta University, June 2024.
Supervisors
1. Angelica E. Njuguna
2. Shadrack Mwiraria