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Application Of A Dynamic Panel Data Estimator To Cross-Country Coffee Demand: A Tale Of Two Eras

Author

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  • Michael S. Webb

    (School of Economics and Finance, Victoria University of Wellington)

  • Viv B Hall

    (School of Economics and Finance, Victoria University of Wellington)

Abstract

We estimate price and income elasticities of demand for green coffee beans in panels of up to 40 countries, both during and after the operation of export quotas under International Coffee Agreements. The dynamic panel estimator proposed in Han and Phillips (2007) is used because it is a consistent estimator, for any length of panel, regardless of the presence of unit roots. Dynamic panel data models, of any type, do not seem to have been previously applied to coffee demand. We find evidence of a concave relationship between income and coffee consumption for countries which are members of the International Coffee Organization, but no evidence of such a relationship for other countries. A further conclusion is that measures which increase the price of coffee beans can be expected to have little effect on coffee sales.

Suggested Citation

  • Michael S. Webb & Viv B Hall, 2009. "Application Of A Dynamic Panel Data Estimator To Cross-Country Coffee Demand: A Tale Of Two Eras," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 34(1), pages 1-17, June.
    • Handle: RePEc:jed:journl:v:34:y:2009:i:1:p:1-17
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    References listed on IDEAS

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    1. Mehta, A. & Chavas, Jean-Paul, 2008. "Responding to the Coffee Crisis: What We Can Learn from Price Dynamics," Working Papers 201444, University of Wisconsin-Madison, Department of Agricultural and Applied Economics, Food System Research Group.
    2. Herrmann, Roland, 1986. "Free riders and the redistributive effects of international commodity agreements: The Case of Coffeee," Journal of Policy Modeling, Elsevier, vol. 8(4), pages 597-621.
    3. Mehta, Aashish & Chavas, Jean-Paul, 2008. "Responding to the coffee crisis: What can we learn from price dynamics?," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 282-311, February.
    4. Han, Chirok & Phillips, Peter C. B., 2010. "Gmm Estimation For Dynamic Panels With Fixed Effects And Strong Instruments At Unity," Econometric Theory, Cambridge University Press, vol. 26(1), pages 119-151, February.
    5. Irving B. Kravis, 1968. "International Commodity Agreements to Promote Aid and Efficiency: The Case of Coffee," Canadian Journal of Economics, Canadian Economics Association, vol. 1(2), pages 295-317, May.
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    Cited by:

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    2. Priya Gupta & Archana Singh, 2016. "Determinants of Foreign Direct Investment Inflows in BRICS Nations: A Panel Data Analysis," Emerging Economy Studies, International Management Institute, vol. 2(2), pages 181-198, November.

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    More about this item

    Keywords

    Coffee Demand; Dynamic Panel Data; International Coffee Organization;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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