Measuring the Impact of a Change in the Price of Cashew Received by Exporters on Farmgate Prices and Poverty in Guinea-Bissau

This paper assesses the impact of a change in the price of cashew received by exporters in general -- and by FUNPI, a fund to promote the industrialization of agricultural products, in particular -- on farmgate prices and poverty in Guinea-Bissau. The analysis builds a theoretical model of supply chains in export agriculture that includes exporters, traders, and farmers competing in a bilateral oligopoly fashion. The model is adapted to data from the country's cashew sector and a household survey. Given the market structure, a shock on export prices or the introduction of an export tax, such as the FUNPI contribution, has a strong effect on farmgate prices, as farmers absorb about 80 percent of the tax (while exporters take up 13 percent and traders absorb the remaining 7 percent). The effect is uneven across households, as poor rural households are more exposed to price volatility and most cashew farmers are poor. It is estimated that their income falls by 12 percent as a result of the FUNPI contribution. Complementary policies can overcome the effect of the FUNPI surcharge on farmgate prices by aiming for reductions in transport, infrastructure, and transaction costs for traders and exporters. Fostering cashew processing would create added value through a displacement of volume from exporters to processors. The analysis finds it implausible that, under reasonable assumtions, a subsidy would overturn the welfare costs of the FUNPI contribution.

Bibliographic Details

Main Authors:	Cont, Walter, Porto, Guido
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank Group, Washington, DC 2014-09
Subjects:	AGRICULTURE, AUCTION, AVERAGE COSTS, AVERAGE PRICE, BENEFICIARIES, BID, BIDS, BROKERS, BUDGET CONSTRAINTS, CAPACITY CONSTRAINT, CAPACITY CONSTRAINTS, CASH TRANSFERS, COLLUSION, COMMODITY, COMPETITION POLICIES, COMPETITION POLICY, COMPETITIVE EQUILIBRIUM, COMPETITIVE MARKET, COMPETITIVE PRICES, COST FUNCTIONS, COST REDUCTION, COST REDUCTIONS, COST STRUCTURE, COST STRUCTURES, DEMAND FUNCTIONS, DEVELOPMENT POLICY, DISTRIBUTION OF INCOME, DOMESTIC PRICES, ELASTICITY OF SUPPLY, EQUILIBRIUM PRICE, EQUILIBRIUM PRICES, EQUILIBRIUM VALUES, EXCHANGE RATE, EXPENDITURE, EXPENDITURES, EXPORTER, EXPORTERS, EXPORTS, EXPOSURE, EXTREME POVERTY, FUNCTIONAL FORMS, GDP, GOVERNANCE MECHANISMS, GOVERNMENT ACTION, GOVERNMENT REVENUES, HOMOGENEOUS GOODS, HOUSEHOLD INCOME, IMPERFECT COMPETITION, INCOME, INDIVIDUAL FIRMS, INDUSTRIALIZATION, INPUT PRICES, INSTRUMENT, INTERNATIONAL BANK, INTERNATIONAL MARKET, MACROECONOMICS, MARGINAL COST, MARGINAL COSTS, MARKET CONCENTRATION, MARKET DATA, MARKET PARTICIPANTS, MARKET PLAYERS, MARKET SHARE, MARKET SHARES, MARKET SIZE, MARKET STRUCTURE, MONOPOLIES, MONOPOLY, NASH EQUILIBRIUM, OFFER QUANTITIES, OLIGOPOLY, OPTIMIZATION, OUTPUT, PRICE CHANGE, PRICE CHANGES, PRICE DECREASES, PRICE ELASTICITY, PRICE ELASTICITY OF SUPPLY, PRICE FLUCTUATIONS, PRICE INCREASE, PRICE INCREASES, PRICE MARGIN, PRICE POLICY, PRICE STRUCTURE, PRICE VOLATILITY, PRODUCER PRICE, PRODUCER PRICES, PROFIT FUNCTIONS, PROFIT MAXIMIZATION, PUBLIC FUNDS, REAL INCOME, RETURN, SALES, SINGLE MARKET, STOCKS, SUBSTITUTE, SUBSTITUTION, SUPPLY CHAIN, SUPPLY CHAINS, SUPPLY ELASTICITY, SUPPLY FUNCTION, SURPLUS, TAX, TAX RATES, TAX REVENUES, TOTAL REVENUE, TRADE TAX, TRADE TAXES, TRADES, TRADING, TRANSACTION, TRANSACTION COSTS, UTILITY FUNCTION,
Online Access:	http://documents.worldbank.org/curated/en/2014/09/20211379/measuring-impact-change-price-cashew-received-exporters-farmgate-prices-poverty-guinea-bissau-measuring-impact-change-price-cashew-received-exporters-farmgate-prices-poverty-guinea-bissau http://hdl.handle.net/10986/20369
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