Trade and Poverty Project

The Trade and Poverty project was a research project studying the effect of international trade on poverty in Africa. The project focussed on two key channels through which international trade affects poverty:

1. The trade-price linkage through which international trade affects price setting and consumption expenditure
2. The trade-employment linkage through which international trade affects employment and wages

Activities

Sub-project 1: Microeconomic evidence on price-setting behavior

The transmission of border prices to consumers is a key link in the impact of international trade on poverty.  This project drew on highly disaggregated retail price data to analyse product market integration within and between African countries. The sample of countries included South Africa, Botswana, Lesotho, Zambia, Tanzania and Malawi. The project focussed on the collection of data, the impact of borders on prices and the influence of trade policy on product market integration and product prices.

Team members included: Neil Rankin (University of Witwatersrand), Asha Sundaram, Mamello Nchake (UCT post-doctoral fellow), Dale Mudenda (UCT PhD candidate) and Neil Balchin (UCT PhD candidate).

Sub-project 2: Price integration in low-income countries: market structure and retail price setting behaviour in Lesotho

Widespread empirical evidence of price discrimination in markets for manufactured goods suggests that national markets should be viewed as segmented rather than integrated. This research is almost entirely driven by studies of price setting behaviour in developed countries. Yet market segmentation is likely to be of greater relevance for developing countries where weak infrastructure, poor distribution networks and ‘thin’ markets create frictions that prevent price arbitrage. This study intended to fill the gap in the literature by considering the case of Lesotho, a low-income country. The primary focus of this was the collection of new data to build on a unique dataset of monthly product prices at the retail level obtained from the Lesotho Bureau of Statistics (BOS).

The research that fed off this database

1. analysed price setting behaviour of retail outlets in Lesotho, covering the frequency of price change and the size of price change;
2. analysed price differences across products and locations within Lesotho;
3. analysed factors that drive price setting behaviour and price differences between retailers, drawing attention to market structure and trade impediments.

Phase 1 of the project involved a number of different people from various institutions

• Lawrence Edwards (UCT)
• Murray Leibbrandt (UCT)
• John Paul Dunne (now at UCT)
• Reza Daniels (UCT)
• Niki Cattaneo, (Rhodes University)
• Samantha Dodd (then a student at Rhodes University)
• Ralitza Dobreva (UKZN)
• Matthew Stern (DNA Economics)
• Frank Flatters (Queens University)
• James Thurlow (IFPRI)
• Chris Stevens (ODI)
• Stephen Hobson
• Sten Dieden
• Christi van der Westhuizen
• Taz Chaponda
• Eric Schaling
• Nnzeni Netshitomboni

Phase 2 involved the following people

• Lawrence Edwards (Principal Investigator)
• Mamello Nchake (Principal Investigator)
• Lukasz Grzybowski
• Asha Sundaram
• Vimal Ranchhod
• Dale Mudenda (UCT PhD candidate)
• Neil Balchin (UCT PhD candidate)