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Application Of A Dynamic Panel Data Estimator To Cross-Country Coffee Demand: A Tale Of Two Eras

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Author Info

  • Michael S. Webb

    (School of Economics and Finance, Victoria University of Wellington)

  • Viv B Hall

    ()
    (School of Economics and Finance, Victoria University of Wellington)

Abstract

We estimate price and income elasticities of demand for green coffee beans in panels of up to 40 countries, both during and after the operation of export quotas under International Coffee Agreements. The dynamic panel estimator proposed in Han and Phillips (2007) is used because it is a consistent estimator, for any length of panel, regardless of the presence of unit roots. Dynamic panel data models, of any type, do not seem to have been previously applied to coffee demand. We find evidence of a concave relationship between income and coffee consumption for countries which are members of the International Coffee Organization, but no evidence of such a relationship for other countries. A further conclusion is that measures which increase the price of coffee beans can be expected to have little effect on coffee sales.

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Bibliographic Info

Article provided by Chung-Ang Unviersity, Department of Economics in its journal Journal Of Economic Development.

Volume (Year): 34 (2009)
Issue (Month): 1 (June)
Pages: 1-17

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Handle: RePEc:jed:journl:v:34:y:2009:i:1:p:1-17

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Related research

Keywords: Coffee Demand; Dynamic Panel Data; International Coffee Organization;

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  1. repec:ltr:wpaper:1994.21 is not listed on IDEAS
  2. Hsaio, Cheng & Pesaran, M. Hashem & Tahmiscioglu, A. Kamil, 1998. "Maximum Likelihood Estimation of Fixed Effects Dynamic Panel Data Models Covering Short Time Periods," Cambridge Working Papers in Economics 9826, Faculty of Economics, University of Cambridge.
  3. Durevall, Dick, 2005. "Demand for Coffee: The Role of Prices, Preferences and Market Power," Working Papers in Economics 162, University of Gothenburg, Department of Economics.
  4. Lord, M J, 1991. "Price Formation in Commodity Markets," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 6(3), pages 239-54, July-Sept.
  5. Mehta, Aashish & Chavas, Jean-Paul, 2008. "Responding to the coffee crisis: What can we learn from price dynamics?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 282-311, February.
  6. Herrmann, Roland, 1986. "Free riders and the redistributive effects of international commodity agreements: The Case of Coffeee," Journal of Policy Modeling, Elsevier, vol. 8(4), pages 597-621.
  7. Nilss Olekalns & Peter Bardsley, 1994. "Rational Addiction to Caffeine: an Analysis of Coffee Consumption," Working Papers 1994.21, School of Economics, La Trobe University.
  8. Feuerstein, Switgard, 2002. "Do coffee roasters benefit from high prices of green coffee?," International Journal of Industrial Organization, Elsevier, vol. 20(1), pages 89-118, January.
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