When Economic Reform Goes Wrong: Cashews in Mozambique

Dani Rodrik, Margaret McMillan and Karen Horn Welch

No 3519, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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.

Keywords: Cashew; Mozambique; Trade policy; Export taxes (search for similar items in EconPapers)
JEL-codes: F1 O0 O5 (search for similar items in EconPapers)
Date: 2002-08
New Economics Papers: this item is included in nep-dev and nep-mic
References: View complete reference list from CitEc
Citations: View citations in EconPapers (30)

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Working Paper: When Economic Reform Goes Wrong: Cashews in Mozambique (2002)
Working Paper: When Economic Reform Goes Wrong: Cashews in Mozambique (2002)
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