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When Economic Reform Goes Wrong: Cashews in Mozambique

Margaret McMillan (), Dani Rodrik () and Karen Horn Welch

No 9117, NBER Working Papers from National Bureau of Economic Research, Inc

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 analyze 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.

JEL-codes: O10 (search for similar items in EconPapers)
Date: 2002-08
New Economics Papers: this item is included in nep-dev and nep-mic
Note: ITI
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Citations: View citations in EconPapers (23) Track citations by RSS feed

Published as McMillan, Margaret, Dani Rodrik and Karen Welch. “When Economic Reform Goes Wrong: Cashew in Mozambique." Brookings Trade Forum 2003.

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