Shade-Grown Coffee: Simulation and Policy Analysis for Coastal Oaxaca, Mexico

Abstract

Shade-grown coffee provides a livelihood to many farmers, protects biodiversity, and creates environmental services. Many shade-coffee farmers have abandoned production in recent years, however, in response to declines in international coffee prices. This paper builds a farmer decision model under price uncertainty and uses simulation analysis of that model to examine the likely impact of various policies on abandonment of shade-coffee plantations. Using information from coastal Oaxaca, Mexico, this paper examines the role of various constraints in abandonment decisions, reveals the importance of the timing of policies, and characterizes the current situation in the study region.

Keywords: coffee farming, decision analysis, numerical modeling, Monte Carlo, price variability

JEL Classification: O13, Q17, Q12, Q23, Q24