Realizing the gains from trade: Export crops, marketing costs, and poverty

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jinteco.2009.01.016 Byline: Jorge Balat (a), Irene Brambilla (a)(b), Guido Porto (c) Keywords: Exports of coffee; Tea; Cotton; Trade costs; Trade facilitation; Market access; Intermediation; Uganda Abstract: This paper explores the role of export costs in the process of poverty reduction in rural Africa. We claim that the marketing costs that emerge when the commercialization of export crops requires intermediaries can lead to lower participation into export cropping and, thus, to higher poverty. We test the model using data from the Uganda National Household Survey. We show that: i) farmers living in villages with fewer outlets for sales of agricultural exports are likely to be poorer than farmers residing in market-endowed villages; ii) market availability leads to increased household participation in export cropping (coffee, tea, cotton, fruits); iii) households engaged in export cropping are less likely to be poor than subsistence-based households. We conclude that the availability of markets for agricultural export crops help realize the gains from trade. This result uncovers the role of complementary factors that provide market access and reduce marketing costs as key building blocks in the link between the gains from export opportunities and the poor. Author Affiliation: (a) Yale University, 37 Hillhouse, New Haven, Connecticut 06511, United States (b) NBER, United States (c) Development Research Group, The World Bank, MailStop MC3-303, 1818 H St., Washington, DC 20433, United States Article History: Received 28 August 2007; Revised 13 June 2008; Accepted 27 January 2009 Article Note: (footnote) [star] We thank J. Muwonge at the Uganda Bureau Of Statistics (UBOS) for assistance with the data and D. Merotto and H. Tang at the World Bank for encouragement and support. We thank H. Ennis, P. Goldberg, A. Harrison, K. Krishna, M. McMillan, and two anonymous referees for detailed comments, and seminar participants at Duke, NBER, Penn State, and the University of Connecticut. This paper was supported by a DECRG Research Support Budget grant and two Dfid projects on trade and services and on trade facilitation. All errors are our responsibility.