Trade Liberalization and Poverty: A Macro-Micro Analysis in Ethiopia

Using a CGE model, this study analyses the impact of trade liberalization on poverty at the household level taking Ethiopia as a case. Two scenarios (complete tariff cut and uniform tariff scheme) suggest that further liberalization of trade has little short-run effect on the overall economy. However, the agriculture-based manufacturing sector (in particular, textile and leather) is likely to be strongly affected by further tariff reduction. Reductions in import prices of textiles and leather products increase imports of these goods implying that trade liberalization is likely to dampen domestic production of textile and leather products. Poverty shows a slight increase in both scenarios. At the national level, a complete tariff cut results in an increase in poverty by 2.8 percent, while a uniform tariff scheme raises poverty by 2.3 percent. Similarly, it is found that poverty gap and poverty severity indices show a slight increase. Comparing the effect of trade reform on different household groups, i.e. farm households, wage earner households and entrepreneur households, poverty in entrepreneur households increases by a higher percentage change (3.2 percent) in the complete tariff cut scenario. Poverty incidence increases by 1.7 and 1.5 percent for farm households and wage earners, respectively, under the complete tariff cut scenario. This comparison holds consistently when looking at the more realistic uniform tariff scheme. Entrepreneur households are at a disadvantage due to trade liberalization shown in the poverty gap and poverty severity indices. This is consistent with the theoretical argument that previously protected infant industries are highly affected by trade liberalization. --trade liberalization,poverty,CGE,import duties,macro-micro simulation

Experience of shocks, household wealth and expectation formation: Evidence from smallholder farmers in Kenya

When faced with uncertain events, decision‐makers form expectations about the events’ likelihood of occurrence. However, the drivers and moderators of such expectations are still poorly understood, especially for farm decision‐makers in developing countries whose incomes are very risky by nature. This article analyses the dynamic shock expectation formation process of farmers in Kenya with regard to a range of shock events using a unique panel dataset. The results suggest that farmers are more likely to update their expectation regarding a specific adverse shock when they have recently been affected by that shock or by more shocks in general. In case of price shocks, farmers are also more likely to update expectations when a larger proportion of fellow village members was affected. However, household wealth moderates the relationship between shock expectation and experience, such that wealthier households are less likely to update their expectations following a shock. A better understanding of the drivers of expectation formation can help in the design of better risk management instruments that increase farmers’ resilience.Peer Reviewe

Fragility exposure index: concepts, measurement, and application

Definitions of fragility are focused at the level of the state, but this should not be considered to suggest that individuals with heterogeneous endowments experience a state of fragility in the same way. Nor does it suggest that all subregions of a fragile country exist in this state. In turn, experience of fragility varies not just at national level but also between districts and between individuals. To test this idea, we develop a fragility exposure module, which was inserted into the standard house-hold survey. We consider three components of fragility: human security, economic inclusion, and social cohesion. We index data collected from a survey in Kenya. We show that experience of fragility in Kenya is in the midrange for most individuals, with notable heterogeneities. Those living in Nairobi experience higher levels of fragility than those in other areas. Young people experience higher levels of fragility than older individuals. We find no evidence of overall differences between men and women. These findings demonstrate the importance of capturing the experience of fragility at the individual level. More specifically, they also provide an important base to understanding which groups would benefit most from pro- stability interventions and for testing the performance of such interventions

Determinants of the competitiveness of smallholder African indigenous vegetable farmers in high-value agro-food chains in Kenya: A multivariate probit regression analysis

Abstract Smallholder farmers are excluded from efficient and effective participation in high-value agro-food market chains due to major competitiveness constraints and several market failures along these chains. The purpose of this study is to contribute to the competitiveness of smallholder farmers in a more coordinated and sustainable way that promote their effective and efficient participation in high-value agro-food market chains. In particular, the study aims at determining the main role of households’ capitals, institutional, and access-related factors in conditioning the decision of smallholder farmers of African indigenous vegetables (AIVs) to access pillars of competitiveness in high-value market chains (HVMCs). For this purpose, a unique household-level data from a total of 1232 rural and peri-urban AIV-producing households were surveyed, and the data obtained were analysed by using a multivariate probit model. The results suggest that about two thirds of smallholder AIV farmers had access to at least one pillar of competitiveness in HVMCs. The model results show the presence of inter-dependency of household level decisions to access multiple pillars of competitiveness in HVMCs. Furthermore, the results also reveal that coping with shocks, coupled with access to information on market prices and warnings of unexpected events, contract farming, certification and modern irrigation technologies are the main conditioning factors to the access of the pillars of competitiveness by smallholder farmers. The promotion and implementation of a well-founded mobile phone-based information access platforms, as well as effective and efficient livelihood strategies that support smallholder farmers to access pillars of competitiveness, is of critical importance towards overcoming the major competitiveness constraints along high-value agro-food chains