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Smuggling and supply response: coffee in Ethiopia

Author

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  • Stefan Dercon
  • Lulseged Ayalew

Abstract

During the 1980s substantial smuggling of coffee has been taking place in Ethiopia. The recent devaluation has raised hopes that substantial quantities of coffee will flow back to the official channels. Data on the incentives to supply to the different channels is collated. A model of official supplies is formulated which nests an empirical test between the smuggling models by Bhagwati and Hansen (1973) and by Pitt (1981). The econometric results favour the latter, and show a small but significant effect of the premium in the black market and a positive total supply response, relative to the main competing crop, chat. The results imply that the increases in export eantings from the devaluation will be quite limited.

Suggested Citation

  • Stefan Dercon & Lulseged Ayalew, 1995. "Smuggling and supply response: coffee in Ethiopia," CSAE Working Paper Series 1995-05, Centre for the Study of African Economies, University of Oxford.
    • Handle: RePEc:csa:wpaper:1995-05
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    Cited by:

    1. Ibáñez, Ana María & Muñoz, Juan Carlos & Verwimp, Philip, "undated". "Abandoning Coffee under the Threat of Violence and the Presence of Illicit Crops. Evidence from Colombia," Documentos CEDE Series 161356, Universidad de Los Andes, Economics Department.
    2. Dercon, Stefan, 2006. "Economic reform, growth and the poor: Evidence from rural Ethiopia," Journal of Development Economics, Elsevier, vol. 81(1), pages 1-24, October.

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