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The impact of commodity price changes on rural households : the case of coffee in Uganda

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  • Bussolo, Maurizio
  • Godart, Olivier
  • Lay, Jann
  • Thiele, Rainer

Abstract

Policies and external shocks affecting agriculture, the main source of income for rural households, can be expected to have a significant impact on poverty. The authors study the case of Uganda. Throughout the 1990s, more than 90 percent of its poor lived in rural areas and, during the same period, large international price fluctuations as well as an extensive domestic deregulation affected the coffee sector, its main source of export revenues. Using data from three household surveys covering the 1990s, the authors confirm a strong correlation between changes in coffee prices (in a liberalized market) and poverty reduction. This is highlighted by comparing the performance of different households grouped according to their dependence on coffee farming. Regression analysis (based on pooled data from the three surveys) of consumption expenditure on coffee-related variables, other controls, and time-fixed effects corroborates that the mentioned correlation is not spurious. The authors also find that while both poor and rich farmers enter the coffee sector, the price boom benefits the poorer households relatively more, whereas the liberalization seems to create more opportunities for richer farmers. Finally, notwithstanding the importance of the coffee price boom, the agricultural policy framework and the thorough structural reforms in which the coffee market liberalization was embedded have certainly played a role in triggering overall agricultural growth. These factors appear to matter especially in the second half of the 1990s when prices went down but poverty reduction continued.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 4088.

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Date of creation: 01 Dec 2006
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Handle: RePEc:wbk:wbrwps:4088

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Keywords: Crops&Crop Management Systems; Markets and Market Access; Rural Poverty Reduction; Access to Markets;

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References

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  1. Kappel, Robert & Lay, Jann & Steiner, Susan, 2005. "Uganda: No more pro-poor growth?," Open Access Publications from Kiel Institute for the World Economy, Kiel Institute for the World Economy (IfW) 3715, Kiel Institute for the World Economy (IfW).
  2. Marcel Fafchamps & Ruth Hill & Aliziki Kaudha, 2003. "The transmission of international commodity prices to domestic producers," Economics Series Working Papers WPS/2003-14, University of Oxford, Department of Economics.
  3. Krivonos, Ekaterina, 2004. "The impact of coffee market reforms on producer prices and price transmission," Policy Research Working Paper Series 3358, The World Bank.
  4. Scott McDonald & Arja & Lindsay Chant, 2004. "The Role of the 1994-95 Coffee Boom in Uganda's Recovery," Working Papers, The University of Sheffield, Department of Economics 2004011, The University of Sheffield, Department of Economics, revised Aug 2004.
  5. Dorosh, Paul A. & El-Said, Moataz & Lofgren, Hans, 2003. "Technical Change, Market Incentives And Rural Incomes: A Cge Analysis Of Uganda'S Agriculture," 2003 Annual Meeting, August 16-22, 2003, Durban, South Africa, International Association of Agricultural Economists 25846, International Association of Agricultural Economists.
  6. Marcel Fafchamps & Ruth Hill, 2004. "Selling at the Farm-Gate or Travelling to Market," Economics Series Working Papers WPS/2004-30, University of Oxford, Department of Economics.
  7. L. Alan Winters & Neil McCulloch & Andrew McKay, 2004. "Trade Liberalization and Poverty: The Evidence So Far," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 42(1), pages 72-115, March.
  8. Belshaw, Deryke & Lawrence, Peter & Hubbard, Michael, 1999. "Agricultural Tradables and Economic Recovery in Uganda: The Limitations of Structural Adjustment in Practice," World Development, Elsevier, Elsevier, vol. 27(4), pages 673-690, April.
  9. Ritva Reinikka & Paul Collier, 2001. "Uganda's Recovery : The Role of Farms, Firms, and Government," World Bank Publications, The World Bank, number 13850, August.
  10. Adam Blake & Andrew McKay & Oliver Morrissey, 2002. "The Impact on Uganda of Agricultural Trade Liberalisation," Journal of Agricultural Economics, Wiley Blackwell, Wiley Blackwell, vol. 53(2), pages 365-381.
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Cited by:
  1. Aksoy , M. Ataman & Isik-Dikmelik, Aylin, 2008. "Are low food prices pro-poor ? net food buyers and sellers in low-income countries," Policy Research Working Paper Series 4642, The World Bank.
  2. Lay, Jann & Golan, Jennifer, 2009. "The Impact of Agricultural Market Liberalisation from a Gender Perspective: Evidence from Uganda," Proceedings of the German Development Economics Conference, Frankfurt a.M. 2009 20, Verein für Socialpolitik, Research Committee Development Economics.
  3. Sasha C. Breger Bush, 2010. "The World Bank’s approach to increasing the vulnerability of small coffee producers," Brooks World Poverty Institute Working Paper Series, BWPI, The University of Manchester 11310, BWPI, The University of Manchester.
  4. Horst Siebert, 2008. "Preventing financial instability and currency crises," Kiel Working Papers 1401, Kiel Institute for the World Economy.
  5. Esther K. Ishengoma & Robert Kappel, 2008. "Business Constraints and Growth Potential of Micro and Small Manufacturing Enterprises in Uganda," GIGA Working Paper Series 78, GIGA German Institute of Global and Area Studies.

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