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When Economic Reform Goes Wrong: Cashews in Mozambique

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Author Info
Horn Welch, Karen
McMillan, Margaret
Rodrik, Dani

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Abstract

Mozambique liberalized its cashew sector in the early 1990s in response to pressure from the World Bank. Opponents of the reform have argued that the policy did little to benefit poor cashew farmers while bankrupting factories in urban areas. Using a welfare-theoretic framework, we analyse the available evidence and provide an accounting of the distributional and efficiency consequences of the reform. We estimate that the direct benefits from reducing restrictions on raw cashew exports were of the order $6.6 million annually, or about 0.14% of Mozambique GDP. However, these benefits were largely offset by the costs of unemployment in the urban areas. The net gain to farmers was probably no greater than $5.3 million, or $5.30 per year for the average cashew-growing household. Inadequate attention to economic structure and to political economy seems to account for these disappointing outcomes.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3519.

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Date of creation: Aug 2002
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Handle: RePEc:cpr:ceprdp:3519

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Related research
Keywords: cashew; export taxes; Mozambique; trade policy;

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Find related papers by JEL classification:
F1 - International Economics - - Trade
O0 - Economic Development, Technological Change, and Growth - - General
O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies

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  1. Cadot, Olivier & Dutoit, Laure & Olarreaga, Marcelo, 2006. "How costly is it for poor farmers to lift themselves out of poverty?," Policy Research Working Paper Series 3881, The World Bank. [Downloadable!]
  2. Jorge Balat & Irene Brambilla & Guido Porto, 2007. "Realizing the Gains From Trade: Export Crops, Marketing Costs, and Poverty," NBER Working Papers 13395, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. Olivier Cadot & Laure Dutoit & Marcelo Olarreaga, 2005. "How Costly is it for Poor Farmers to Lift Themselves out of Subsistence?," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 05.09, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
    Other versions:
  4. Rose, Andrew K, 2002. "Do WTO Members have More Liberal Trade Policy?," CEPR Discussion Papers 3659, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Thierry Buchs, 2005. "Privatization in Sub-Saharan Africa: Some Lessons from Experiences to Date," Microeconomics 0502007, EconWPA. [Downloadable!]
  6. Sexton, Richard & Sheldon, Ian & McCorriston, Steve & Wang, Humei, 2004. "Analyzing Vertical Market Structure And Its Implications For Trade Liberalization," 2004 Annual meeting, August 1-4, Denver, CO 20060, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  7. Porto, Guido, 2008. "Agro-manufactured export prices, wages and unemployment," Policy Research Working Paper Series 4489, The World Bank. [Downloadable!]
    Other versions:
  8. Ronchi, Loraine, 2006. "Fairtrade and market failures in agricultural commodity markets," Policy Research Working Paper Series 4011, The World Bank. [Downloadable!]
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