Economic liberalization and structural adjustment: The Moroccan sugar policy

Lahsen Esslimi, Purdue University

Abstract

Up until the early years of independence, Morocco was completely dependent upon foreign sources of sugar. With installation of capacity for domestic production, imports dropped off starting in the mid-sixties. By 1985, about 65 percent of consumption was supplied by domestic sources. The economic liberalization of the Moroccan economy begun in the mid-eighties has led to gradual restucturing of many sectors. This study examines the effects of liberalization of Moroccan sugar policy on social welfare in the present period (1985), and in the future (1995). Special attention is devoted to the influence of four domestic policy changes, but liberalization in the linkages to the world market for sugar is also considered. Based on previous studies of liberalization in the world market of sugar, it is expected that liberalization would increase the world price and the quantity of trade. The basic method of analysis is an econometric model which allows for the simultaneous determination of domestic supply, demand, and imports of sugar. A structural system of equations was developed. The behavioral equations estimated the supply, marketing margins (industry, wholesale, retail), consumer demand, and intended imports of sugar. Estimation was performed by the three-stage-least-squares regression method. Finally, a simulation of the sugar subsector is used to predict the 1985-1995 adjustment to certain policy changes. Simulation results indicate the benefits of piecemeal liberalization and adjustment of the Moroccan sugar sector are tenuous. Net social welfare changes by at most 4% for five individual policy changes (eliminating consumer subsidy, producer tax, or fuel tax; increasing farm prices; and devaluation). However, the overall effect of the all six domestic policy changes (including lifting import quotas) resulted in a net social welfare increase of up to 24.0% compared to the 1985 benchmark. With liberalization of the world market of sugar as well as full domestic liberalization, however, social welfare increases slightly to about 16% because the decrease in consumers' surplus outweighs the increases in producers' surplus.

Degree

Ph.D.

Advisors

Connor, Purdue University.

Subject Area

Agricultural economics

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