When Economic Reform Goes Wrong: Cashews in Mozambique

61 Pages Posted: 12 Feb 2003

See all articles by Margaret McMillan

Margaret McMillan

Tufts University - Department of Economics; International Food Policy Research Institute (IFPRI); National Bureau of Economic Research (NBER)

Dani Rodrik

Harvard University - Harvard Kennedy School (HKS); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Karen Horn Welch

Stanford University - Freeman Spogli Institute for International Studies

Multiple version iconThere are 3 versions of this paper

Date Written: July 2002

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.

Keywords: International Development, International Trade and Finance

Suggested Citation

McMillan, Margaret and Rodrik, Dani and Horn Welch, Karen, When Economic Reform Goes Wrong: Cashews in Mozambique (July 2002). KSG Working Paper Series RWP02-028. Available at SSRN: https://ssrn.com/abstract=376960 or http://dx.doi.org/10.2139/ssrn.376960

Margaret McMillan

Tufts University - Department of Economics ( email )

Medford, MA 02155
United States

International Food Policy Research Institute (IFPRI) ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Dani Rodrik (Contact Author)

Harvard University - Harvard Kennedy School (HKS) ( email )

79 John F. Kennedy Street
Cambridge, MA 02138
United States
617-495-9454 (Phone)
617-496-5747 (Fax)

HOME PAGE: http://www.ksg.harvard.edu/rodrik/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Karen Horn Welch

Stanford University - Freeman Spogli Institute for International Studies ( email )

Stanford, CA 94305
United States

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