Coffee Prices and Smuggling in Ethiopia

Abstract

Official and black market coffee price series are brought together to discuss the incentives to produce coffee since 1963. On the basis of empirical analysis of prices and supply response, it is argued that some increased export earnings can be expected from a switch from smuggling into official channels.  However, these increases will be relatively small coffee production is found to be responsive to prices, but this effect is most likely to be relative to other crop prices, in particular chat.   During the period of the Dergue, supply response was found to be smaller than in the 1960s, reflecting the adverse climate for expansion of crop production existing during the 1970s and 1980s.  Following the devaluation coffee  production may well increase again, but the increases are unlikely be very large.