When Economic Reform Goes Wrong: Cashews in Mozambique
AbstractMozambique 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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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3519.
Date of creation: Aug 2002
Date of revision:
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Other versions of this item:
- McMillan, Margaret & Rodrik, Dani & Welch, Karen Horn, 2002. "When Economic Reform Goes Wrong: Cashews in Mozambique," Working Paper Series rwp02-028, Harvard University, John F. Kennedy School of Government.
- Margaret McMillan & Dani Rodrik & Karen Horn Welch, 2002. "When Economic Reform Goes Wrong: Cashews in Mozambique," NBER Working Papers 9117, National Bureau of Economic Research, Inc.
- F1 - International Economics - - Trade
- O0 - Economic Development, Technological Change, and Growth - - General
- O5 - Economic Development, Technological Change, and Growth - - Economywide Country Studies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-03-14 (All new papers)
- NEP-DEV-2003-03-14 (Development)
- NEP-MIC-2003-03-14 (Microeconomics)
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