Agglomeration, Migration and Agricultural Growth: A Regional CGE Analysis for Uganda

Uganda experienced rapid growth and poverty reduction over the last decade, but failed to significantly improve incomes in its northern regions where prolonged conflict has, until recently, hindered growth. Three broad strategies are proposed to close the regional divide: (i) a north-south transport corridor to encourage regional trade; (ii) accelerated growth in the southern capital city and encourage north-south migration; and (iii) improve agricultural productivity in rural areas. These strategies are examined using a regionalized economywide model, accounting for internal migration and productivity gains from urban agglomeration. Simulation results indicate that a north-south corridor benefits northern households but its national benefits are limited by the small size of northern urban centers and the low productivity of northern producers. Investing in the capital city accelerates economic growth but has little effect on other regions’ welfare because of the city’s weak linkages with other regions and small migration effects. Improving agricultural productivity, however, though less effective at stimulating national economic growth, generates broad-based welfare improvements in both rural and urban areas. We therefore conclude that without significant gains in agricultural productivity in the next decade, out-migration and urban-led growth centered in Kampala will be insufficient to significantly reduce poverty in northern Uganda.