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The adding-up problem : strategies for primary commodity exports in sub-Saharan Africa

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  • Akiyama, Takamasa
  • Larson, Donald F.
  • DEC

Abstract

Many countries in sub-Saharan Africa remain dependent on a few primary commodities -- coffee, cocoa, cotton, sugar, tea, and tobacco -- for a large share of export earnings. Because demand for these commodities is price-inelastic, production and export expansion can depress world prices and hence reduce net export revenue. The authors discuss the effects of this phenomenon -- the adding-up problem -- on policy and development strategies for major agricultural export commodities in sub-Saharan Africa. They conclude that, as a practical matter, it is not feasible to design a regional commodity production and trade policy for sub-Saharan Africa as a whole because of the difficulty of equitably distributing the benefits of such a policy. Moreover, if an export tax is imposed on sub-Saharan Africa as a whole, the greatest benefits may go to producers in other regions such as Asia and Latin America. Individually, few countries in sub-Saharan Africa have sufficient market power to influence commodity prices in the long run. Possible expectations include Cote d'Ivoire (in cocoa) and to a lesser extent Ghana (in cocoa), Kenya (in tea), and Malawi (in burley tobacco). Export taxes may prove beneficial for these countries but, at certain levels, the primary effect of"optimal"taxes is to transfer resources from smallholders to governments with limited marginal welfare gains.

Suggested Citation

  • Akiyama, Takamasa & Larson, Donald F. & DEC, 1994. "The adding-up problem : strategies for primary commodity exports in sub-Saharan Africa," Policy Research Working Paper Series 1245, The World Bank.
    • Handle: RePEc:wbk:wbrwps:1245
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    References listed on IDEAS

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    Cited by:

    1. Raymond B Swaray, "undated". "Volatility of primary commodity prices: some evidence from agricultural exports in Sub-Saharan Africa," Discussion Papers 02/06, Department of Economics, University of York.
    2. Jörg Mayer, 2002. "The Fallacy of Composition: A Review of the Literature," The World Economy, Wiley Blackwell, vol. 25(6), pages 875-894, June.
    3. Christopher L. Gilbert & Panos Varangis, 2003. "Globalization and International Commodity Trade with Specific Reference to the West African Cocoa Producers," NBER Working Papers 9668, National Bureau of Economic Research, Inc.
    4. Pascal Monier, 1998. "Ajustement structurel et modification de la structure d'exportations primaires des pays en développement," Revue Tiers Monde, Programme National Persée, vol. 39(156), pages 793-817.
    5. Takamasa Akiyama & Akihiko Nishio, 1996. "Indonesia's cocoa boom : hands-off policy encourages smallholder dynamism," Policy Research Working Paper Series 1580, The World Bank.
    6. Cashin, Paul & McDermott, C. John & Pattillo, Catherine, 2004. "Terms of trade shocks in Africa: are they short-lived or long-lived?," Journal of Development Economics, Elsevier, vol. 73(2), pages 727-744, April.
    7. Kala Krishna, 1998. "The adding up problem: a targeting approach," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(2), pages 151-173.
    8. Kaplan, Lennart, 2021. ""Reversed favoritism" - Resolving the puzzle of discriminatory taxation in African agriculture," University of Göttingen Working Papers in Economics 416, University of Goettingen, Department of Economics.
    9. Alessandro De Matteis, 2004. "International trade and economic growth in a global environment," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(4), pages 575-588.
    10. Larson, Donald F., 1996. "Indonesia's palm oil subsector," Policy Research Working Paper Series 1654, The World Bank.
    11. Yilmaz, K., 1999. "Nash and Stackelberg Optimum Export Taxes," Papers 99/04, Koc University.
    12. Christopher Gilbert & Panos Varangis, 2004. "Globalization and International Commodity Trade with Specific Reference to the West African Cocoa Producers," NBER Chapters, in: Challenges to Globalization: Analyzing the Economics, pages 131-163, National Bureau of Economic Research, Inc.
    13. Permani, Risti, 2013. "Optimal Export Tax Rates of Cocoa Beans: A Vector Error Correction Model Approach," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(4), pages 1-22.
    14. Olga Solleder, 2013. "Panel Export Taxes (PET) Dataset: New Data on Export Tax Rates," IHEID Working Papers 07-2013, Economics Section, The Graduate Institute of International Studies.
    15. Nanae Yabuki & Takamasa Akiyama, 1996. "Is commodity-dependence pessimism justified? Critical factors and government policies that characterize dynamic commodity sectors," Policy Research Working Paper Series 1600, The World Bank.
    16. Ashok Parikh, 2002. "Impact of Liberalization, Economic Growth and Trade Policies on Current Accounts of Developing Countries: An Econometric Study," WIDER Working Paper Series DP2002-63, World Institute for Development Economic Research (UNU-WIDER).
    17. Pop Larisa Nicoleta, 2015. "Assessing The Governance For Commodity Price Stabilization - A Retrospective Look," Annals of Faculty of Economics, University of Oradea, Faculty of Economics, vol. 1(1), pages 504-513, July.
    18. Varangis, Panos & Larson, Don, 1996. "Dealing with commodity price uncertainty," Policy Research Working Paper Series 1667, The World Bank.
    19. Andri Kopperschmidt & Jacint Matutes, 1997. "Assessment of trade liberalisation in sub-Saharan Africa," Intereconomics: Review of European Economic Policy, Springer;ZBW - Leibniz Information Centre for Economics;Centre for European Policy Studies (CEPS), vol. 32(4), pages 193-202, July.
    20. Kamil Yilmaz, 2006. "How much should primary commodity exports be taxed? Nash and Stackelberg equilibria in the Global Cocoa Market," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 15(1), pages 1-26.
    21. V. Dhanya, 2008. "Liberalisation of tropical commodity market and adding-up problem: A Bound test approach," Centre for Development Studies, Trivendrum Working Papers 399, Centre for Development Studies, Trivendrum, India.

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