Effects of Maize Importation on the Economic Welfare of Maize Producers and Consumers in Kenya: A Partial Equilibrium Model Approach

Abstract

Maize imports bridge the maize supply-demand gap in Kenya. However, this does not automatically imply any positive or negative effects of such imports on the economic welfare of maize producers and consumers in the country. Nevertheless, there is a limited body of literature dealing with maize importation effects on the economic welfare of maize producers and consumers in Kenya. This paper provides the empirical evidence of maize importation effects on the economic welfare of Kenyan maize producers and consumers. For the purpose of determining such effects, time series secondary data for the period 1963–2016 (FAOSTAT, World Bank and Kenya National Bureau of Statistics) and the partial equilibrium model were used (which is suitable for measuring the effects of pricing policies on specific sectors, allowing for perfect substitutability between domestically produced and imported goods). The maize imports in Kenya were found to yield ambiguous effects on the economic welfare of both maize consumers and producers in the country. The consumer surplus calculated gained only the compensated loss in the producer surplus in 2 out of 11 points of analysis. Conversely, the producer surplus calculated gained only a compensated loss in the consumer surplus in 1 out of 11 points of analysis. The resultant net economic welfare effect of maize importation in Kenya was found negative, indicating adverse impacts on both the Kenyan maize sector and economy as a whole. To ensure the sustainability and development of the maize sector in Kenya, further maize imports are considered not feasible without compensating the losses in the country’s maize sector. Therefore, complementary reforms should be introduced to forge a link between world and consumer prices, and encourage producers to respond to production incentives. This will not only benefit maize producers and consumers, but will also facilitate the efficient allocation of resources for the improvement of the maize sub-sector competitiveness.

Keywords

• trade liberalisation
• partial equilibrium model
• economic welfare
• maize imports
• kenya