The appraisal of the impact of alternative trade policies on the Kenyan economy from a general equilibrium model

Abstract

The aim of the dissertation is giving an empirical appraisal of trade policy changes in a developing country, using a general equilibrium model. In a first half, an overview is given of the evolution in the theory of incorporating trade policy in planning models starting from simple calculations of effective rates of protection. It is shown that the general equilibrium price endogenous models form a natural outcome of the evolution of the theory. This part forms the theoretical background of the model developed in the next part. The second half develops and applies a general equilibrium simulation model for the economy of Kenya. In explaining the model an attempt has been made to keep the transparence of the Kenya model as high as possible. The main characteristics of the model are its general equilibrium nature and its high level of disaggregation in the production sector. In the final chapter some simulations with trade policy are carried out with the stress on the different reactions over an eight year time period of import-substituting and export-promoting policies. The main finding is that the quantitative results confirm the trade theory as developed by the classical trade theorists but the dynamic effects are relatively slow and low. The dissertation ends with appendices on the complete model in equation form, the main results of the regressions and some considerations about the statistical data set.