Smuggling and Supply Response: Coffee in Ethiopia.

Journal article

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. In this study data on the incentives to supply to the different channels are 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 favor 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 earnings from the devaluation will be quite limited.

Authors: Dercon, S; Ayalew, L

• Publisher: Elsevier
• Journal: World Development
• Volume: 23
• Issue: 10
• Pages: 1795 - 1813
• Publication date: 1995-01-01
• DOI: 10.1016/0305-750X(95)00069-O
• ISSN: 0305-750X
• Language: English