Competition in Kenyan Markets and Its Impact on Income and Poverty : A Case Study on Sugar and Maize
This paper investigates the link between competitive, well-functioning food markets and consumer welfare. The paper explores two key food markets in Kenya -- sugar and maize -- and argues that a variety of factors conspire to distort market prices...
| Main Authors: | , |
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| Format: | Publications & Research |
| Language: | English en_US |
| Published: |
World Bank Group, Washington, DC
2015
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2015/01/23884246/competition-kenyan-markets-impact-income-poverty-case-study-sugar-maize http://hdl.handle.net/10986/21395 |
| Summary: | This paper investigates the link between
competitive, well-functioning food markets and consumer
welfare. The paper explores two key food markets in Kenya --
sugar and maize -- and argues that a variety of factors
conspire to distort market prices upward. Distortionary
factors include import tariff policy, nontariff barriers,
potential anticompetitive conduct by firms, and direct state
intervention in markets. Changes in sugar and maize prices
are shown to have significant welfare effects on consumers.
Equivalent income effects are estimated using the most
recent available representative household survey data -- the
Kenya Integrated Household Budget Survey 2005/06. The paper
shows that relaxing trade barriers to allow sugar prices to
fall by 20 percent could reduce poverty by 1.5 percent.
Similarly, adjusting government interventions in the maize
market, which have been shown to inflate maize prices by 20
percent on average, could reduce poverty by 1.8 percent. The
magnitude of the estimated income effects may vary based on
updated household-level consumption data, assumptions
regarding demand elasticities, and estimates of import
parity prices for these staples. However, in all the
scenarios, more competitive prices have a larger average
effect on the poorest households in urban and rural areas,
supporting the relevance of effective competition policies
for poverty reduction strategies. |
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