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A computable general equilibrium model is used to analyse the allocative and distributional impact of some agricultural policy options for Kenya. A Kenyan social accounting matrix is employed as a database, and it has been aggregated and disaggregated to accommodate additional data sources and arranged to follow the transaction value approach. Increasing wages to attract more labour into estate agriculture under conditions of monopsony is the preferred policy to increase labour employment and to improve households’ income and consumption, especially that of the poorer segment of society. The economy is either non‐responsive to the impact of indirect tax changes or the changes are quite small. Terms of trade improvements such as increasing world prices of agricultural exports result, in a significant boost of income and GDP, are effective in increasing returns to labour and are an important step in reducing poverty.
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Department of Economics, University of Botswana.