A quantitative economic analysis of the impact of price reform and the elimination of subsidies on poverty among cotton producing households in rural Uganda : a thesis presented in partial fulfilment of the requirement for the degree of Masters in Applied Economics at Massey University, Palmerston North, New Zealand

Abstract

The benefits of eliminating cotton subsidies for Africa have been studied in terms of a higher world price, greater market share and higher export earnings for Africa. These estimates have focused on macroeconomic gains. This research simulates the effect of increases in the price on incomes of cotton growing households in rural Uganda to assess the impact on poverty levels. The Foster-Greer-Thorbecke measure of poverty is used to analyse the effect price increase on poverty. Results from this research indicate that Ugandan cotton farmers are unlikely to benefit from the elimination of cotton subsidies without price reform within its domestic cotton market. It is estimated that price reform alone can decrease poverty by 5 percent among cotton growing households in the Northern and Eastern Regions of Uganda. The results of the simulations also indicate increasing the price of cotton reduces the income gap for those households that remain in poverty despite the price increase. Thus the price increase decreases the severity of poverty amongst cotton producing households in rural Uganda.