1 / 11

Rui M.S. Benfica Maputo, Mozambique September, 2006

Poverty Effects of Expansion and Policies in Cotton Economies in Rural Mozambique: An Economy-wide Approach. Rui M.S. Benfica Maputo, Mozambique September, 2006. OUTLINE. Research Objectives Economy-wide Models Flows in the Regional Economy Regional CGE Model

annick
Download Presentation

Rui M.S. Benfica Maputo, Mozambique September, 2006

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Poverty Effects of Expansion and Policies in Cotton Economies in Rural Mozambique: An Economy-wide Approach Rui M.S. Benfica Maputo, Mozambique September, 2006

  2. OUTLINE • Research Objectives • Economy-wide Models • Flows in the Regional Economy • Regional CGE Model • Policy Simulations with the CGE Model • Model Results • Policy Implications

  3. RESEARCH OBJECTIVES To assess the economy-wide and poverty effects on household groups of expansion in the cotton sector and of shocks/policies affecting the sector

  4. Factor Domestic Private Savings Markets Factor Wages Costs Gov. Savings & Rents Taxes Intermediate Input Cost Capital:S-I Households Government Activities Transfers Home Consumption Private Government Consumption Investment Consumption Demand Commodity Markets Sales Household Remittances Foreign Transfers Exports Imports Rest of the Foreign Savings World ECONOMY-WIDE MODELSFlows in the Regional Economy Source: Adapted from Lofgren et al. (2002)

  5. Economy-wide ModelsThe Regional CGE Model • Based on the IFPRI Standard Model (Lofgren et al., 2002) • Calibrated with the disaggregated Zambezi Valley SAMs • Agent behavior: • Producers maximize profits • Consumers Maximize utility • Functional forms: • Production technology: LEO and CES • Consumer demand: LES • Output supply: CET to domestic market and exports • Commodity demand: CES from domestic market and imports (*) Model used to account for feedback and indirect effects of expansion and shocks and assess the income poverty implications on household groups.

  6. Factor market closures Fully employed activity specific CF capital Full mobility and unemployment for all other factors Unemployed factors can be brought into production at the going market wages/rents during expansion Macro system closures Government budget: fixed tax rates and flexible savings Limited role of Local GOV Rest of the World balance: flexible exchange rate regime Justified by significant foreign trade Fixed exchange rate attempted without major differences in results Capital account: Savings-driven Investment Appropriate for a credit constrained economy The Regional CGE Model Closures

  7. Policy Simulations with the CGE Model • Expansion: Increase in activity specific capital • Expansion with: • Productivity gains in the cotton sector • Increases in export prices of cotton and maize • Increase in import prices of intermediate inputs • Tax on cotton exports (*) Mix of shocks relevant for the policy debate. All shocks at 15% change level. • Stochastic Dominance approach to poverty analysis • CDFs and Flexible Poverty Lines

  8. Poverty reduction good for CG: 15% (CFC+productivity) => 40% pc inc Higher productivity yield greater effects than export prices of cotton Maize has substantial impact Effect of increase in import price of inputs almost negligible on poverty reduction efforts. Why? Results of Policy SimulationsCotton Areas – Grower Households (CG)

  9. Results of Policy SimulationsCotton Areas – non-growers (CNG) • Income effects on CNG smaller in magnitude and comparatively to tobacco areas: 31% with productivity and expansion • Somewhat important indirect effects: • Increased demand for farm (26-33%) and non-farm labor (32-38%) increases remunerations for all groups • Indirect effects greater with productivity gains • With productivity gains each 10% gain in CG income corresponds to 7.7% gain among CNG…but both groups start from a low base • Substantial Benefits/losses from variations in maize export prices • A 15% increase in maize export price during cotton expansion increases CNG pc income in 39%

  10. POLICY IMPLICATIONS (1) • Encourage expansion with increased productivity: • Use of improved/high yielding seeds • Strengthening of extension systems • Improve techniques and field practices • Better grading systems • Gains from expansion and improved productivity can: • Maximize indirect effects leading to broad based poverty reduction • Counter the negative effects of low export prices and increased import prices of inputs • Encourage maize production and trade • Include maize package in CF schemes • Avoid domestic and cross-border flow restrictions • Poverty reduction effects are sizable when prices are high • Associated food security important

  11. POLICY IMPLICATIONS (2) • Government needs to avoid trade restrictions, e.g., export taxes • Lack of returns to education suggests • high scope for improvement in productivity enhancing field practices capable of rewarding more educated farmers; • Further research in understanding the differential poverty impacts of alternative contracting styles during expansion • Intensive versus extensive approaches

More Related