The implications of trade policy and 'natural' barriers induced protection for aggregate demand for imports: Evidence for Malawi

Abstract

This paper analyses the relative importance of trade policy and ‘natural’ trade barriers in the demand for imports for Malawi, a geographically landlocked sub-Saharan African economy, using an augmented dynamic import demand model. Incidence analysis of protection shows that pre-liberalisation trade policy barriers were greater than ‘natural’ barriers but in post-liberalisation ‘natural’ barriers were greater. Econometric analysis of the import demand model shows that ‘true’ protection of importables has been a decisive disincentive to importing. Therefore, like other landlocked countries Malawi needs to aggressively lower not only trade policy barriers but also ‘natural’ barriers for greater efficient trade.

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