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Coca Substitution and Free Trade in Bolivia: The Pending Crisis

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  • Hugo Toledo

Abstract

This paper uses the factors proportion model of production and trade with ten inputs to analyze the potential impact of the Free Trade Agreement of the Americas (FTAA) on the coca substitution program in Bolivia. With six crops including coca, the model produces comparative statics elasticities of changing prices on factor prices and output. Results show that the coca substitution program with free trade will result in large income redistribution in the coca‐producing region as a result of increased competition from larger and more efficient economies. Increased subsidies and institutional changes will be needed to sustain the coca substitution program in the long run.

Suggested Citation

  • Hugo Toledo, 2007. "Coca Substitution and Free Trade in Bolivia: The Pending Crisis," Review of Development Economics, Wiley Blackwell, vol. 11(1), pages 63-77, February.
  • Handle: RePEc:bla:rdevec:v:11:y:2007:i:1:p:63-77
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    File URL: https://doi.org/10.1111/j.1467-9361.2007.00363.x
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    References listed on IDEAS

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    1. Frank J. Chaloupka & Michael Grossman & John A. Tauras, 1999. "The Demand for Cocaine and Marijuana by Youth," NBER Chapters, in: The Economic Analysis of Substance Use and Abuse: An Integration of Econometric and Behavioral Economic Research, pages 133-156, National Bureau of Economic Research, Inc.
    2. Henry Thompson, 2010. "Handbook on International Trade Policy," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(5), pages 1493-1495.
    3. Edward J. Balistreri & Christine A. McDaniel & Eina Vivian Wong, 2003. "An Estimation of U.S. Industry-Level Capital-Labor Substitution," Computational Economics 0303001, University Library of Munich, Germany.
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    Cited by:

    1. Toledo, Hugo, 2011. "EU-GCC free trade agreement: Adjustments in a factors proportion model for the UAE," International Review of Economics & Finance, Elsevier, vol. 20(2), pages 248-256, April.

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