ABSTRACT

The majority of people in developing countries engage in agricultural production and market. This characteristic is the key to the strategy for tackling poverty. It can be linked to trade liberalisation through the Winters framework that postulates four main pathways that link trade policy with household welfare and poverty. Several studies have examined the effects of market on households and poverty as conceptualised in the Winters framework. The market effects relate to the price mechanism and market distribution system. Most developing countries are agrarian economies, and agricultural prices and market distribution matter greatly to the poor. By altering the prices of tradable goods and the market distribution system, trade liberalisation has a considerable impact on poverty (Deaton, 2008). One of the most important conditions for the outward-oriented strategy to be successful is to maintain macroeconomic stability, which is indirectly beneficial for the poor (Bhagwati and Srinivasan, 2002). Trade policy can cause price distortion, resulting from trade monopoly, distributional channels, transaction costs, and other institutional costs. The poor are unlikely to benefit from trade liberalisation, due primarily to the ineffectiveness of the price transmission to households. Several studies provide evidence on the impacts of prices and market distribution on welfare and income distribution (Deaton, 1989; Minot and Goletti, 1998; Porto, 2004; Winters et al ., 2004; Seshan, 2005; Isik-Dikmelik, 2006; Justino et al ., 2008; Nicita, 2009; Marchand, 2012).