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Impact of global cotton markets on rural poverty in Benin

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Minot, Nicholas
Daniels, Lisa

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Abstract

World cotton prices have fallen by about 40 percent over the last two years, focusing attention on the effect of subsidies for cotton growers in depressing prices. This paper combines farm survey data from Benin with assumptions about the decline in farm-level prices to estimate the direct and indirect effects of cotton price reductions on rural income and poverty in Benin. The results indicate that there is a strong link between cotton prices and rural welfare in Benin. A 40 percent reduction in farm-level prices of cotton results in an increase in rural poverty of 8 percentage points in the short-run and 6-7 percentage points in the long run. Based on the estimated marginal propensity to consume tradable goods, the consumption multiplier is in the range of 3.3, meaning that one dollar of reduced spending by cotton growers results in a contraction of 3.3 dollars in overall demand. Finally, econometric analysis of the determinants of the demand for hired agricultural labor suggests that falling cotton prices will not greatly reduce labor demand since the labor intensity of cotton is similar to that of competing crops in Benin. Overall, the study highlights the link between rising subsidies for cotton growers in the U.S. and rural poverty in cotton exporting countries such as Benin.

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Paper provided by International Food Policy Research Institute (IFPRI) in its series MTID discussion papers with number 48.

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Date of creation: 2002
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Handle: RePEc:fpr:mtiddp:48

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Badiane, Ousmane, 1996. "The impact of the CFA devaluation on cereal markets in selected CMA/WCA member countries," MTID discussion papers 8, International Food Policy Research Institute (IFPRI). [Downloadable!]
  2. Fafchamps, Marcel & Minten, Bart, 1998. "Relationships and traders in Madagascar," MTID discussion papers 24, International Food Policy Research Institute (IFPRI). [Downloadable!]
  3. Goletti, Francesco & Badiane, Ousmane & Sil, Jayashree, 1994. "Foodgrain market integration under market reforms in Egypt," MTID discussion papers 1, International Food Policy Research Institute (IFPRI). [Downloadable!]
  4. Steven Durlauf & Marcel Fafchamps, 2004. "Social Capital," Development and Comp Systems 0409060, EconWPA. [Downloadable!]
    Other versions:
    • Steven N. Durlauf & Marcel Fafchamps, 2004. "Social Capital," NBER Working Papers 10485, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    • Durlauf, Steven N. & Fafchamps, Marcel, 2005. "Social Capital," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 26, pages 1639-1699 Elsevier. [Downloadable!] (restricted)
  5. Goletti, Francesco & Minot, Nicholas, 1997. "Rice markets, agricultural growth, and policy options in Viet Nam," MTID discussion papers 14, International Food Policy Research Institute (IFPRI). [Downloadable!]
  6. Minot, Nicholas, 1998. "Generating disaggregated poverty maps," MTID discussion papers 25, International Food Policy Research Institute (IFPRI). [Downloadable!]
  7. Goletti, Francesco & Minot, Nicholas & Berry, Philippe, 1997. "Marketing constraints on rice exports from Viet Nam," MTID discussion papers 15, International Food Policy Research Institute (IFPRI). [Downloadable!]
  8. Holloway, Garth & Nicholson, Charles F. & Delgado, Christopher L. & Staal, Steven & Ehui, Simeon K., 1999. "Agroindustrialization through institutional innovation," MTID discussion papers 35, International Food Policy Research Institute (IFPRI). [Downloadable!]
  9. Rashid, Shahidur & Sharma, Manohar & Zeller, Manfred, 2002. "Micro-lending for small farmers in Bangladesh," MTID discussion papers 45, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  10. Kherallah, Mylène & Minot, Nicholas & Gruhn, Peter, 1999. "Adjustment of wheat production to market reform in Egypt," MTID discussion papers 32, International Food Policy Research Institute (IFPRI). [Downloadable!]
  11. Minot, Nicholas & Baulch, Bob, 2002. "The spatial distribution of poverty in Vietnam and the potential for targeting," MSSD discussion papers 42, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  12. Minot, Nicholas & Kherallah, Mylène & Berry, Philippe, 2000. "Fertilizer market reform and the determinants of fertilizer use in Benin and Malawi," MTID discussion papers 40, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  13. Fafchamps, Marcel & Minten, Bart, 1999. "Property rights in a flea market economy," MTID discussion papers 27, International Food Policy Research Institute (IFPRI). [Downloadable!]
    Other versions:
  14. Dorosh, Paul A. & Shahabuddin, Quazi & Aziz, M. Abdul & Farid, Naser, 2002. "Bumper crops, producer incentives and persistent poverty," MSSD discussion papers 43, International Food Policy Research Institute (IFPRI). [Downloadable!]
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  15. Delgado, Christopher L. & Courbois, Claude & Rosegrant, Mark W., 1998. "Global food demand and the contribution of livestock as we enter the new millennium," MTID discussion papers 21, International Food Policy Research Institute (IFPRI). [Downloadable!]
  16. Badiane, Ousmane, 1994. "Agricultural market reforms in Egypt," MTID discussion papers 2, International Food Policy Research Institute (IFPRI). [Downloadable!]
  17. Badiane, Ousmane & Nuppenau, Ernst-August, 1997. "Reforming and promoting local agricultural markets," MTID discussion papers 10, International Food Policy Research Institute (IFPRI). [Downloadable!]
  18. Delgado, Christopher L. & Rosegrant, Mark W. & Steinfeld, Henning & Ehui, Simeon K. & Courbois, Claude, 1999. "The growing place of livestock products in world food in the twenty-first century," MTID discussion papers 28, International Food Policy Research Institute (IFPRI). [Downloadable!]
  19. Badiane, Ousmane, 1998. "Marketing policy reform and competitiveness," MTID discussion papers 22, International Food Policy Research Institute (IFPRI). [Downloadable!]
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