Acreage Response of Cotton in Benin: Macro-level Response and Some Policy Implications

Abstract

Cotton is very important for the economy and for poverty alleviation in Benin. However, cotton lint production started having a decreasing trend since 2003, and this is due to the decline in cotton acreage. Thus, to help inform policy decisions on how cotton production could be boosted, this study estimated acreage response of cotton by the means of Ordinary Least Squares (OLS) over the period 1971-2011. In this regards, the model is estimated using the Hendry Error Correction Model. The results reveal that, in the long run, cotton acreage depends positively and significantly on the exchange rate, total number of tractor used, and lagged real producer price of cotton seed, and negatively and significantly on lagged producer price of rice paddy. In the short run, cotton acreage is significantly driven by rural population growth, and lagged real producer price of cotton seed, and is negatively influenced by lagged producer price of rice paddy. These results suggest that Benin could improve cotton production by putting in place measures to increase area devoted to cotton production, reduce labor shortages, eliminate inefficiencies in cotton sector management, and promote tractor use. Moreover, the central bank could maintain current exchange rate policy and reinforce it.