A Sam-Multiplier Analysis of the Linkages between Trade Policy and Poverty Reduction in Botswana

Concerns are quite widely expressed about the adverse impact on globalisation on poverty within developing countries, but often such discussion is characterised by a lack of clarity in identifying the problem and supporting evidence. This study addresses one aspect of this problem, that is assessing the impact of trade liberalization on poverty in Botswana through the application of partial equilibrium and economy-wide approaches. Reaping the gains from trade requires countries to change their production structures, so, trade liberalisation involves adjustment. This, in turn, means changes in the distribution of income among households or socio-economic groups. At a personal level, there will be gainers and losers, and the losses could be quite significant (e.g. if someone falls into unemployment). At the economy-wide level, income inequality will change, although there is no reason why it should necessarily worsen. In both cases, what actually happens depends on many factors, not least initial conditions and the types of trade reforms undertaken. In a cross-country study of eight liberalising Asian countries, results showed varying degrees of success in reducing poverty. However, much of the variation across countries tended t