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The adding-up problem : strategies for primary commodity exports in sub-Saharan Africa

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  • Akiyama, Takamasa
  • Larson, Donald F.
  • DEC

Abstract

Many countries in sub-Saharan Africa remain dependent on a few primary commodities -- coffee, cocoa, cotton, sugar, tea, and tobacco -- for a large share of export earnings. Because demand for these commodities is price-inelastic, production and export expansion can depress world prices and hence reduce net export revenue. The authors discuss the effects of this phenomenon -- the adding-up problem -- on policy and development strategies for major agricultural export commodities in sub-Saharan Africa. They conclude that, as a practical matter, it is not feasible to design a regional commodity production and trade policy for sub-Saharan Africa as a whole because of the difficulty of equitably distributing the benefits of such a policy. Moreover, if an export tax is imposed on sub-Saharan Africa as a whole, the greatest benefits may go to producers in other regions such as Asia and Latin America. Individually, few countries in sub-Saharan Africa have sufficient market power to influence commodity prices in the long run. Possible expectations include Cote d'Ivoire (in cocoa) and to a lesser extent Ghana (in cocoa), Kenya (in tea), and Malawi (in burley tobacco). Export taxes may prove beneficial for these countries but, at certain levels, the primary effect of"optimal"taxes is to transfer resources from smallholders to governments with limited marginal welfare gains.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1245.

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Date of creation: 31 Jan 1994
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Handle: RePEc:wbk:wbrwps:1245

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Keywords: Economic Theory&Research; Environmental Economics&Policies; Crops&Crop Management Systems; Access to Markets; Markets and Market Access;

References

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  1. Takamasa Akiyama, 1992. "Is there a case for an optimal export tax on perennial crops?," Policy Research Working Paper Series 854, The World Bank.
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Citations

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Cited by:
  1. Alessandro De Matteis, 2004. "International trade and economic growth in a global environment," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(4), pages 575-588.
  2. Larson, Donald F., 1996. "Indonesia's palm oil subsector," Policy Research Working Paper Series 1654, The World Bank.
  3. Raymond B Swaray, . "Volatility of primary commodity prices: some evidence from agricultural exports in Sub-Saharan Africa," Discussion Papers, Department of Economics, University of York 02/06, Department of Economics, University of York.
  4. Christopher Gilbert & Panos Varangis, 2004. "Globalization and International Commodity Trade with Specific Reference to the West African Cocoa Producers," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 131-166 National Bureau of Economic Research, Inc.
  5. Krishna, K., 1993. "The Adding Up Problem: A Tergeting Approach," Papers, Pennsylvania State - Department of Economics 10-93-33, Pennsylvania State - Department of Economics.
  6. Nanae Yabuki & Takamasa Akiyama, 1996. "Is commodity-dependence pessimism justified? Critical factors and government policies that characterize dynamic commodity sectors," Policy Research Working Paper Series 1600, The World Bank.
  7. Olga Solleder, 2013. "Panel Export Taxes (PET) Dataset: New Data on Export Tax Rates," IHEID Working Papers, Economics Section, The Graduate Institute of International Studies 07-2013, Economics Section, The Graduate Institute of International Studies, revised 04 Apr 2013.
  8. Parikh, Ashok, 2002. "Impact of Liberalization, Economic Growth and Trade Policies on Current Accounts of Developing Countries: An Econometric Study," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  9. Cashin, Paul & McDermott, C. John & Pattillo, Catherine, 2004. "Terms of trade shocks in Africa: are they short-lived or long-lived?," Journal of Development Economics, Elsevier, Elsevier, vol. 73(2), pages 727-744, April.
  10. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank.
  11. Kamil Yilmaz, 2006. "How much should primary commodity exports be taxed? Nash and Stackelberg equilibria in the Global Cocoa Market," The Journal of International Trade & Economic Development, Taylor & Francis Journals, Taylor & Francis Journals, vol. 15(1), pages 1-26.
  12. Takamasa Akiyama & Akihiko Nishio, 1996. "Indonesia's cocoa boom : hands-off policy encourages smallholder dynamism," Policy Research Working Paper Series 1580, The World Bank.
  13. Christopher L. Gilbert & Panos Varangis, 2003. "Globalization and International Commodity Trade with Specific Reference to the West African Cocoa Producers," NBER Working Papers 9668, National Bureau of Economic Research, Inc.
  14. V. Dhanya, 2008. "Liberalisation of tropical commodity market and adding-up problem: A Bound test approach," Centre for Development Studies, Trivendrum Working Papers, Centre for Development Studies, Trivendrum, India 399, Centre for Development Studies, Trivendrum, India.

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