The static and dynamic welfare effects of Botswana's participation in Southern African regional and multilateral trade integration process: A computable general equilibrium analysis
The objective of this dissertation is to measure the static and dynamic net welfare gains to Botswana from regional trade integration. This is done by calculating an equivalent variation for its participartion with other Southern African countries in the regional integration schemes of Southern African Customs Union (SACU) and Southern African Development Community (SADC). Measurement of the gains is made in static terms as well as by dynamic inter-temporal period using applied computable general equilibrium (CGE) methods. The question that this dissertation addresses is whether membership in a customs union with a larger trading partner to Botswana, such as South Africa, yields much net benefits to the country? Are there any targets for regional integration that results in Pareto improvement to welfare and does economic integration improve economic efficiency (in terms of maximum output per unit of input) as some firms lose monopoly or technological leadership in the region?; In ongoing debate, there are contrasting views about the welfare benefits of globalization. Some suggest that regionalism offers a middle ground. It is neither full globalization which entails free trade nor autarky. The costs and benefits of regional trade versus multilateral trade should be of interest to policy makers. Is it preferable for developing nations (like Botswana) to work through smaller free-trade areas (PTAs) or through the World Trade Organization (WTO)?; This is because even for Southern African (and Botswana in particular), household welfare as measured by Hicksian equivalent variation increases with the reduction and or complete elimination of tariffs between members regionally and multilaterally. Furthermore, measures that reduce terms of trade such as increasing price of imports reduce welfare, consumption, investment, factor inputs, exports and imports. Increasing price of exports, which is an improvement in the terms of trade, has the opposite effects of raising welfare as well as all the macroeconomic variables for the single-country, multi-country and dynamic models developed in this dissertation. I believe that the main contribution that this dissertation has made is formulating a single, multi-country static and dynamic CGE model for Botswana where none had been done before. Moreover, contrasting regional and multilateral integration effects is a useful area for analysis. These issues must be of interest to policy-makers in the region, especially in Botswana.