Export Tax and Pricing Power: Two Hypotheses on the Cocoa Market in Côte d’Ivoire
IMF Working Papers, November 1, 2010
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Bibliographic details
- Authors: Alexei P Kireyev
- Published: November 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781455210763.001
Summary
- The paper models export taxation of a primary commodity in a large country under two hypotheses about the structure of its export market.
- Hypothesis 1: perfect competition among exporters, with an indefinite number of buyers of the local product and at least a partial pass-through of international prices to local producers.
- Hypothesis 2: an oligopsony, where numerous scattered local producers face a few powerful exporters that can influence domestic prices.
- For both hypotheses:
- Export taxation can be justified on efficiency grounds only for the country that adopts the tax.
- A low export tax, if designed correctly, may be welfare-enhancing for the taxing country.
- Any such export tax will always be welfare-reducing for trading partners.
- The models for both hypotheses are calibrated for the illustrative case of cocoa exports from Côte d’Ivoire.
Modeling hypotheses and market structure
- Perfect competition among exporters:
- Assumes an indefinite number of buyers.
- Allows at least a partial pass-through of international prices to local producers.
- Oligopsony:
- Characteristic of some low-income countries.
- Numerous scattered local producers face a few powerful exporters able to influence domestic prices.
Welfare implications and policy insight
- Export taxation justification:
- Efficiency gains from an export tax accrue only to the country that adopts the tax.
- Properly designed low export taxes can increase the welfare of the taxing country.
- Trading partners unambiguously lose welfare from such export taxation.
- Policy relevance:
- Differentiation of market structure (perfect competition vs. oligopsony) is central to assessing the impact and optimal design of export taxes on primary commodities.
Calibration and illustrative case
- The paper calibrates its models to the cocoa export market of Côte d’Ivoire as an illustrative application.
Publication and metadata
- Author: Alexei P Kireyev
- Date: November 1, 2010
- Series: Working Paper No. 2010/269
- Issue: 269
- Volume: 2010
- Pages: 33
- DOI: https://doi.org/10.5089/9781455210763.001
- Stock No: WPIEA2010269
- ISBN: 9781455210763
- ISSN: 1018-5941
- Subjects: Agricultural commodities, Demand elasticity, Export prices, Exports, Tariffs
- Keywords: demand curve, export tax, world price, WP
IMF Working Paper: "Export Tax and Pricing Power: Two Hypotheses on the Cocoa Market in Côte d’Ivoire" by Alexei P Kireyev, November 1, 2010.