Institute for Development Studies, University of Nairobi

Certain developments in international trade have made it inevitable for LDCs to commence import-substituting industrialization. The measures used to intervene in trade for this purpose have resulted in certain factor and commodity price distortions in the domestic economies of LDCs, giving rise to resource allocational and income distribution effects which are not often appreciated. Tariffs quantitative restrictions, import duty drawbacks on inputs as well as administrative controls are shown to have been widely used in Kenya to promote industrialization and exports. Different combinations of these policies have different effects on income distributions resource allocation and profits. The effects are further complicated by imperfections in import-substituting industries. Certain measures are proposed for more efficient combinations of the policies in the face of imperfections.