Coffee Commodity Chain - 10329 Words

DEPARTMENT OF ECONOMICS ISSN 1441-5429 DISCUSSION PAPER 06/08 COFFEE COMMODITY CHAIN Tine S. Olsen and Brett Inderâ™ ¦ ABSTRACT: To explain the value added along the coffee commodity chain we propose and estimate a theoretical model of the coffee commodity chain. The theoretical model consists of four markets and five agents in the coffee commodity chain and predicts that prices in the coffee commodity chain move together but are also influenced by income, technology and production. A vector error correction model is used to test the theoretical predictions. In addition to the theoretical conclusions the empirical model confirms the beneficial role of the International Coffee Agreement and the importance of the level of†¦show more content†¦Darity and Davis (2005) argue that in the study of uneven development the North-South trade and growth literature provides insights which have been neglected by the later literature of new growth theory and new trade theory. This has encouraged us to apply North-South models to the coffee value chain. The theoretical model derived in section 2 builds on Bloch and Sapsford (2000) who model primary commodities used as inputs in the production of manufacturing. Where Bloch and Sapsford (2000) take an aggregate view of primary commodities and manufactures, we here focus on coffee and hereby take an approach similar to Boratav (2001) who examines terms of trade for individual commodities. And just like Bloch, Dockery, and Sapsford (2004) we analyse the effect of mark-up on wages and commodity prices on the final consumer prices. Price transmission literature such as Hazell, Jaramillo, and Williamson (1990), Mundlak and Larson (1992), Baffes and Gardner (2003), Krivonos (2004), Morisset (1998) and Weldegebriel (2004) also offer a framework to analyse prices of commodities at different 3 nodes of the commodity chain. This part of the literature views producer and retail prices as determined by world prices. In Bloch and Sapsford (2000) the price of manufactures, which is a good higher up in the value chain if it isShow MoreRelatedCoffee Commodity Chain And Its Effects On The Global South1406 Words   |  6 PagesThrough-out this essay I will discuss the coffee commodity chain and its effects on the Global South. This essay will also, illustrate the impact coffee has on boosting developing countries’ economies while, looking into Fairtrade and its links to the commodity chain. The world in terms of development is divided in two, which is known as the ‘North-South divide’ this shows a separation between developed and developing countries. This separation is caused by economic, social and environmental factorsRead MoreBeans to a Cup: The Commodity Chain of a Cup of Coffee1255 Words   |  6 PagesCoffee is a growing part of people’s daily lives. Just before the 9-5 weekdays, and even during the 9-5, it is common for the working class to drink a cup of coffee. 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