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When Economic Reform Goes Wrong: Cashews in Mozambique

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  • Horn Welch, Karen
  • McMillan, Margaret
  • Rodrik, Dani

Abstract

Mozambique liberalized its cashew sector in the early 1990s in response to pressure from the World Bank. Opponents of the reform have argued that the policy did little to benefit poor cashew farmers while bankrupting factories in urban areas. Using a welfare-theoretic framework, we analyse the available evidence and provide an accounting of the distributional and efficiency consequences of the reform. We estimate that the direct benefits from reducing restrictions on raw cashew exports were of the order $6.6 million annually, or about 0.14% of Mozambique GDP. However, these benefits were largely offset by the costs of unemployment in the urban areas. The net gain to farmers was probably no greater than $5.3 million, or $5.30 per year for the average cashew-growing household. Inadequate attention to economic structure and to political economy seems to account for these disappointing outcomes.

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  • Horn Welch, Karen & McMillan, Margaret & Rodrik, Dani, 2002. "When Economic Reform Goes Wrong: Cashews in Mozambique," CEPR Discussion Papers 3519, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3519
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    Cited by:

    1. Pierluigi Montalbano & Rebecca Pietrelli & Luca Salvatici, 2017. "Market chain participation and food security: the case of the Ugandan maize farmers," Working Papers 2/17, Sapienza University of Rome, DISS.
    2. Chau, Nancy & Goto, Hideaki & Kanbur, Ravi, 2009. "Middlemen, Non-Profits, and Poverty," IZA Discussion Papers 4406, Institute for the Study of Labor (IZA).
    3. Thierry Buchs, 2005. "Privatization in Sub-Saharan Africa: Some Lessons from Experiences to Date," Microeconomics 0502007, EconWPA.
    4. Sexton, Richard J. & Sheldon, Ian M. & McCorriston, Steve & Wang, Humei, 2004. "Analyzing Vertical Market Structure And Its Implications For Trade Liberalization," 2004 Annual meeting, August 1-4, Denver, CO 20060, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Margaret S. McMillan & Dani Rodrik, 2011. "Globalization, Structural Change and Productivity Growth," NBER Working Papers 17143, National Bureau of Economic Research, Inc.
    6. Ronchi, Loraine, 2006. "Fairtrade and market failures in agricultural commodity markets," Policy Research Working Paper Series 4011, The World Bank.
    7. Balat, Jorge & Brambilla, Irene & Porto, Guido, 2009. "Realizing the gains from trade: Export crops, marketing costs, and poverty," Journal of International Economics, Elsevier, pages 21-31.
    8. Cadot, Olivier & Dutoit, Laure & Olarreaga, Marcelo, 2005. "How Costly is it for Poor Farmers to Lift Themselves out of Subsistence?," CEPR Discussion Papers 5392, C.E.P.R. Discussion Papers.
    9. Rose, Andrew K., 2004. "Do WTO members have more liberal trade policy?," Journal of International Economics, Elsevier, pages 209-235.
    10. Guido G. Porto, 2008. "Agro-Manufactured Export Prices, Wages and Unemployment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 90(3), pages 748-764.
    11. Götz, Linde & von Cramon-Taubadel, Stephan & Kachel, Yael, 0. "Vertical Price Transmission in the International Fresh Fruit and Vegetable Supply Chain: Israeli Grapefruit Exports to the EU after Export Liberalisation," Quarterly Journal of International Agriculture, Humboldt-Universität zu Berlin, vol. 53.
    12. Garrido, Henrique & Vendeirinho, Vivian & Brito, M.C., 2016. "Feasibility of KUDURA hybrid generation system in Mozambique: Sensitivity study of the small-scale PV-biomass and PV-diesel power generation hybrid system," Renewable Energy, Elsevier, vol. 92(C), pages 47-57.
    13. Pranab Bardhan & Dilip Mookherjee & Masatoshi Tsumagari, 2013. "Middlemen Margins and Globalization," American Economic Journal: Microeconomics, American Economic Association, vol. 5(4), pages 81-119, November.
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    16. Kopp, Thomas & Brummer, Bernhard, 2015. "Traders and Credit Constrained Farmers: Market Power along Indonesian Rubber Value Chains," 2015 Conference, August 9-14, 2015, Milan, Italy 212012, International Association of Agricultural Economists.
    17. Cadot, Olivier & Dutoit, Laure & Olarreaga, Marcelo, 2006. "How costly is it for poor farmers to lift themselves out of poverty?," Policy Research Working Paper Series 3881, The World Bank.
    18. Ludena, Carlos E. & Schuschny, Andres & de Miguel, Carlos & Duran Lima, Jose E., 2009. "Georeferenced Assessment of Trade Liberalization Effects on Agriculture in Ecuador," 2009 Conference, August 16-22, 2009, Beijing, China 50556, International Association of Agricultural Economists.
    19. Jan Fałkowski & Agata Malak-Rawlikowska & Dominika Milczarek-Andrzejewska, 2013. "Determinants and Consequences of Participating in a Restructured Supply Chain: the Experience of the Dairy Sector in Poland," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 34.
    20. Sandip Mitra & Dilip Mookherjee & Maximo Torero & Sujata Visaria, 2013. "Asymmetric Information and Middleman Margins: An Experiment with West Bengal Potato Farmers," Working Papers id:5545, eSocialSciences.
    21. Hoque, Mainul Mohammad & Schroeter, John R., 2010. "Agricultural Trade Liberalization and Downstream Market Power: Some Extensions," Staff General Research Papers Archive 31390, Iowa State University, Department of Economics.
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    Keywords

    cashew; export taxes; Mozambique; trade policy;

    JEL classification:

    • F1 - International Economics - - Trade
    • O0 - Economic Development, Innovation, Technological Change, and Growth - - General
    • O5 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies

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