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Biofuels, Poverty, and Growth: A Computable General Equilibrium Analysis of Mozambique

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  • Arndt, Channing
  • Benfica, Rui M.S.
  • Tarp, Finn
  • Thurlow, James
  • Uaiene, Rafael N.

Abstract

This paper assesses the implications of large-scale investments in biofuels for growth and income distribution. We find that biofuels investment enhances growth and poverty reduction despite some displacement of food crops by biofuels. Overall, the biofuel investment trajectory analyzed increases Mozambique’s annual economic growth by 0.6 percentage points and reduces the incidence of poverty by about six percentage points over a 12-year phase-in period. Benefits depend on production technology. An outgrower approach to producing biofuels is more pro-poor, due to the greater use of unskilled labor and accrual of land rents to smallholders, compared with the more capital-intensive plantation approach. Moreover, the benefits of outgrower schemes are enhanced if they result in technology spillovers to other crops. These results should not be taken as a green light for unrestrained biofuels development. Rather, they indicate that a carefully designed and managed biofuels policy holds the potential for substantial gains.

Suggested Citation

  • Arndt, Channing & Benfica, Rui M.S. & Tarp, Finn & Thurlow, James & Uaiene, Rafael N., 2008. "Biofuels, Poverty, and Growth: A Computable General Equilibrium Analysis of Mozambique," 2009 Conference, August 16-22, 2009, Beijing, China 52004, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaae09:52004
    DOI: 10.22004/ag.econ.52004
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    References listed on IDEAS

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    1. Channing Arndt & Kenneth R. Simler, 2007. "Consistent poverty comparisons and inference," Agricultural Economics, International Association of Agricultural Economists, vol. 37(2‐3), pages 133-139, September.
    2. Lence, Sergio H & Miller, Douglas J, 1998. "Estimation of Multi-output Production Functions with Incomplete Data: A Generalised Maximum Entropy Approach," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 25(2), pages 188-209.
    3. Finn Tarp, 2006. "Aid and Development," Discussion Papers 06-12, University of Copenhagen. Department of Economics.
    4. Richard E. Just & David Zilberman & Eithan Hochman & Ziv Bar-Shira, 1990. "Input Allocation in Multicrop Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(1), pages 200-209.
    5. Channing Arndt & Robert C. James & Kenneth R. Simler, 2006. "Has Economic Growth in Mozambique been Pro-Poor?," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(4), pages 571-602, December.
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