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Abstract

This paper assesses the welfare effects of a combination of policy changes affecting PNG cocoa producers during the 1990's. These policy changes are the introduction (in 1992) and intended removal (in 1997) of a price support policy plus an intervening devaluation and subsequent floating of the domestic currency (kina). Using a model for analysing the effects of these policy changes on a producer's price distribution and for converting these price effects into welfare effects, combined with price, cost and yield data from the PNG cocoa industry, it is shown that both the price support policy and the devaluation have been of benefit to producers. However, the devaluation has also diminished the effectiveness of the price support policy so that the negative consequences of its intended removal have been lessened.

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