Household Welfare and the Pricing of Cocoa and Coffee in Cote d'Ivoire: Lessons from the Living Standards Surveys

Cocoa and coffee are the most important crops in Cote d'Ivoire. Until recently, the difference between world and administered producer prices provided an important source of government revenue. As a result of a continued decline of world prices of both crops, however, the Ivoirien government was forced to cut producer prices in half. Because 40 percent of Ivoirien households grow either cocoa or coffee, this cut can be expected to have a considerable impact on the welfare level of these housebolds. We use the 1985 Living Standards Measurement Survey to estimate the welfare effects of producer price cbanges for Ivoirien households, permitting an evaluation of the probable consequences of the recent price cut. Using nonparametnc econometric techniques, we find that, although many households will suffer losses of income, the cuts will not have adverse distributional effects: cocoa and coffee farmers are scattered throughout the income distribution, but most are concentrated in the middle.