Kenya and the Doha Round: The Economic and Development Impact

1. Kenya and the Doha Round:The Economic and Development Impact Eduardo Zepeda

2. Objective and methodology Study examines the impacts of international trade negotiations on trade and production patterns, employment and poverty in Kenya. The study uses global and country CGE models.

10. NAMA Scenario

11. The Global Model used is the MIRAGE model Market access scenario are defined at the HS6 digit level using the MACMap data base. Export subsidies are taken into account in the model and are supposed to be equal to 0 in 2013. Domestic support more complicated. They are modeled as in Bchir et al (2006). Scenario for market access implemented by taking into account the binding overhang and the status of binding.

12. Effect of global simulation on world agriculture prices

13. Effect of global simulation on world NAMA prices

14. The country level analysis The model used here is a recursive, dynamic multi-sectoral single country model. It provides results for the period 2005-2015. A full presentation of the standard version of the model is given in Bchir, Chemingui and Ben Hammouda (2007). For the objectives of the present study, substantial changes are introduced to the original version of the model.

15. The features of the Kenyan CGE model The first change is the elimination of the formal/informal features of production by activity. This simplification was imposed by the lack of data on formal and informal production technologies. As the Kenyan SAM allows for some activities to produce more than one single commodity, a multi-commodity production function is adopted for some sectors. A significant adaptation of labor market to the features of the Kenyan economy

16. Labor market Three alternative labor market segments are considered: skilled, semi-skilled and unskilled. For each category, labor supply is supposed to grow naturally each year by an exogenous rate . The labor demand addressed by each single activity for each category is deduced from the cost minimization program. The total demand of each labor category equals the sum of demand from all the activities.

17. Labor Market (Cont.) To take into account the unemployment effects, all the labor markets are supposed to be not competitive markets Wages are supposed not to be the result of the confrontation between supply and demand but depend on other macroeconomic variables. For every category of labor, growth in wage is defined according to a Cobb-Douglas function of inflation rates and the corresponding unemployment rate.

18. The SAM 2003 The 2003 Social Accounting Matrix (SAM) was built by the Kenya Institute for Public Policy Research and Analysis (KIPPRA) and the International Food Policy Research Institute (IFPRI). It contains 50 Activities, 50 Commodities, 20 Households (10 rural deciles and 10 urban deciles), 3 labor categories, land, capital, government, ROW, and 3 fiscal instruments (sale tax, direct tax, and import tax).

19. The country level simulations The baseline scenario: Government deficit is fixed as a share of GDP, fixed tax rates, current expenditures fixed, and government spending on capital adjusts. GDP exogenous, growth of labor and populations are exogenous 2. The global trade simulation: In addition to the assumptions taken in the baseline scenario, the trade simulation includes: Implementation of tariff reduction rates from MACMAP on the Kenyan applied tariff rates extracted from the SAM Changes in world prices from MIRAGE