Scott R. Pearson

Comparative Advantage among African Coffee Producers

Relative comparative advantage is measured by contrasting country ratios of the domestic resource costs per unit of foreign exchange earned by exporting coffee to the exchange rate. Uganda, Ethiopia, and Tanzania have strong relative comparative advantages in coffee vis-a-vis the Ivory Coast, largely because of higher opportunity costs of Ivoirian factors.

Economies of Scale, Domestic Divergences, and Potential Gains from Economic Integration in Ghana and the Ivory Coast

Economies of scale and domestic divergences offer an important scope for gains from industrial integration among developing countries. Underutilized industrial capacity, together with distorting policies and imperfections in factor markets, provides a rationale for countries to swap opportunities for industrial expansion. Through integration, Ghana and the Ivory Coast stand to achieve welfare gains of 33 and 22 percent of gross output in world prices. About two-fifths of these gains have their source in Viners trade-creation effects, one-fifth in Cordens cost-reduction effects, and two-fifths in the newly suggested production effects.

The efficiency of producing alcohol for energy in Brazil.

Brazil is one of the few countries actually producing renewable fuels as a substitute for OPEC oil. There are now 150 distilleries producing five billion liters of ethanol a year from sugar cane, with another 100 distilleries in the planning and construction stages. The current stability of world oil prices, however, does not make alcohol substitution economically efficient for Brazil, and costs foreign exchange. The authors analyze the economics of alcohol production in two regions and find it to be socially unprofitable in terms of breaking even, although it does serve to dampen any impact from increasing oil prices. 5 tables. (DCK)

Net social profitability, domestic resource costs, and effective rate of protection

Net social profitability (NSP) and domestic resource costs of foreign exchange earned or saved (DRC) are conceptually related, since each can be derived from the other. The effective rate of protection on value added (ERP) is algebraically identical to DRC if all importable inputs are actually imported or are zero, NSP is zero, and (ERP+1) is multiplied by the shadow price of foreign exchange. A decision rule for allocation of resources is to approve all projects with a positive NSP and a DRC ratio less than the shadow price of foreign exchange. No comparable rule can be stated for ERP, except under special assumptions.

Expanding the policy dimension of farming systems research

Abstract The contribution of economics to farming systems research (FSR) has usually been restricted to the microeconomic analysis of alternative agricultural production technologies. In the traditional approach to FSR, macroeconomic variables and government policies are treated as exogenous. This paper discusses one method for expanding the policy analysis dimension of FSR. The policy analysis matrix method allows for the explicit treatment of macroeconomic and sectoral policies, and it builds logically on the wealth of technical and microeconomic data traditionally utilized in FSR. Examples from Portuguese agriculture are used to illustrate the method.

The Impact of Investment Concessions on the Profitability of Selected Firms in Ghana

Investment concessions are widely used by governments of developing countries to attract new industry through provision of temporary tax benefits. Analysis of the effects of such concessions is rare in the literature on economic development because of the difficulty of obtaining detailed public information on their application to specific firms. The purpose of this article is to suggest an approach for analyzing the effects of specific investment concessions in the context of other general policies that also influence the profitability of individual firms and to apply the method using a small sample of industrial firms in Ghana.

Welfare Effects of a Processing Cartel: Flour Milling in Portugal

In response to pressures to ease the pace of adjustment to free competition, some governments permit a domestic industry to reap excess profits by forming a cartel to restrict output and raise consumer prices. The scope for pernicious cartel policy can be greater when the industry is a processor of primary commodities because there is often less need to protect the processing cartel from import competition. Transportation costs for many processed products are much larger than those for the raw material, and these differentials create natural barriers to trade. The wide difference between the potential c.i.f. price for imports and the potential f.o.b. price for exports causes the processed product to become a nontradable good, with price determined purely by domestic demand and supply conditions. The degree of competition among domestic firms then becomes a key determinant of the margins provided to processing activities, and industrial cartels can reap large monopoly profits even if the government does not enact a protective trade policy. In such circumstances, it is not possible to use trade policy to limit the effects of a government-enforced cartel. The Portuguese flour-milling industry provides an interesting case study of the influence of government cartel, trade, and input policies on a processing industry. Relative susceptibility to moisture damage, a multiplicity of qualities, and relatively high handling costs make international trade in flour less attractive than commerce in wheat.1 For