The Future of Smallholder Farming in Eastern Africa - Uganda ...

Table 3: Sectoral Parameters
Agriculture Manufacturing Service
Elasticity in intermediate input CES 0.80 0.60 0.40
Elasticity in value added CES 0.50 0.70 0.60
Elasticity in composite labour CES 0.50 0.50 0.50
Elasticity in import CES 0.80 0.60 0.40
Elasticity in export CET 1.30 0.80 0.30
Source: Average of equivalent values used in Fargeix and Sadoulet (1994) for Ecuador, Dervis et al.
(1982) for a semi-industrialised Turkish economy, Dorosh (1996) for Madagascar and Dorosh et al.
(1996) for Niger.
Table 4: Household Consumption Parameters (Income Elasticities) 11
Uhh1 Uhh2 Uhh3 Rhh1 Rhh2 Rhh3 Rhh4 Rhh5 Rhh6 Rhh7
Agriculture 0.90 0.70 0.50 0.90 0.80 0.70 0.60 0.50 0.50 0.70
Manufacturing 1.10 1.30 1.40 1.10 1.20 1.30 1.40 1.50 1.60 1.30
Service 0.70 0.80 1.10 0.70 0.80 0.90 1.00 1.10 1.20 0.80
Frisch
parameter
-4.00 -3.00 -2.00 -4.50 -4.00 -3.50 -3.00 -2.50 -2.00 -3.50
Source: Fargeix and Sadoulet (1994) and Lluch et al. (1977).
The Trade Policy Simulation
The policy simulation in KEGEM is not a complete removal of all trade tariffs but a
calculated reduction in the tariff rate. From the input-output and social accounting
matrix data of 1986, the effective import duty rates were an average of 16.4 percent and
25.2 percent for agricultural and manufactured imports, respectively. 12, 13 Table 5 shows
the rates computed by averaging the tariff rates (import duty divided by import values).
11 Uhh1 = Low income urban households; Uhh2 = Middle income urban households; Uhh3 = High
income urban households; Rhh1 = Rural households holding less than 0.5 ha. and with little additional
income; Rhh2 = Rural households holding 0.5 ha. with substantial additional income; Rhh3 = Rural
households holding greater than 0.5 ha. but less than 1.0 ha. with little additional income; Rhh4 = Rural
households (holding less than 0.5 ha. but less than 1.0 ha. with substantial additional income; Rhh5 =
Rural households holding greater than 1.0 ha. but less than 8.0 ha.; Rhh6 = Rural households holding
greater than 8.0 ha. (small farms only); Rhh7 = Other rural households.
12 These import duty rates are calculated by the simple formula: tariff rate for sector i = total duty
collections in sector i/total imports of sector i.
13 These tariff rates are very similar to those calculated using National Accounts data as import duty
divided by the import values.